How To Detect And Forestall Fraud

PREAMBLES

• The greatest problem facing the banking industry globally at present is fraud.

• The banking trade loses billions of dollars yearly to fraudulent activities.

• Some of the frauds are executed efficiently by outsiders while a reasonable number is efficiently perpetuated with the connivance of an insider/staff.

• Anyone can perpetuate a fraud.

FALSE ASSUMPTION ABOUT FRAUD

Under are some false assumptions about fraud:

1. Most individuals is not going to commit fraud.

Response: A vast majority of individuals, underneath sure circumstances, will commit fraud particularly if they’re convinced that it will go undetected. Due to this fact everybody should be assumed to generally tend to commit fraud.

2. Fraud isn’t material.

Response: Fraud could be very material and it’s capable of eroding the working capital of any organization which consequently outcomes to illiquidity and insolvency.

3. Most fraud goes undetected.

Response: Most frauds are detected over time particularly if due process and procedure is followed.

4. Fraud might be well hid and the auditor can’t detect it.

Response: There is often a loop hole that can eventually come to the open. With a sound inner control process, such fraud will finally be detected.

A well trained auditor can easily detect a fraud following correctly designed audit program.

5. Those that are caught and prosecuted usually are not wise.

Response: The staff with fraudulent intentions think that these caught should not smart and the mindset of a primary-time fraudster is either: I’m just going to do it once or, I’m too smart to get caught.

COMMON TYPES OF FRAUD

Widespread types of fraud in banking include the following:

1. Cheque substitution

2. Cheque Suppression

3. Cheque cloning

4. Cheque kitting

5. Cheque alteration

6. Teeming and lading

7. Claiming unearned overtime allowance

8. Dry posting

9. Accumulating prices due from unauthorized and unofficial lengthy duration phone calls

10. Overstating claims for reimbursement

11. Deposit suppression

12. Adding fictitious names to the payroll

13. Overcharging clients

14. Removing money directly from vault, until box, petty cash and so on

15. Obtaining funds for false invoices both self-prepared or obtained provider or vendor (e.g. Hotel, air ticket and so forth).

FACTORS CONTRIBUTING TO FRAUD

• Growing complexity in the structure of a corporation

• Increasing speed of transaction dynamics

• Improved technological advancement which support the benefit with which transactions are concluded

• History of inattention of supervisors

• Understaffing which might cause a breakdown of twin control

• Acceptance of some stage of fraud as ‘price of doing enterprise’.

• Outdated and ineffective management measures that don’t meet settle forable world standard.

• Improve in workers turnover which technically could lead to understaffing

• Aggressive accounting entries all in the bid to publish profit.

FRAUD SIGNS

The next are traits of a fraudulent workers which should put supervisors and associates on guard:

1. An employee who frequently borrows small quantities of money from different colleagues

2. An worker who asks to “hold” his or her personal cheque earlier than negotiating it

3. A workers who ceaselessly closes late and doesn’t go on vacation.

4. Low or inadequate salary levels employees

5. Staff who show resentment at not being handled fairly or being taken advantage of

6. Superiors who lack respect and appreciation for employees

7. Highly domineering senior administration

8. Workers who appear to be residing, and spending above their means

9. Split purchases

10. Bid process irregularities

11. Similar bidders time and time again

12. Payment of invoices from a duplicate somewhat than an original

13. Uncommon sequence of numbers on vendor invoices

EFFECTS OF FRAUD

Fraud has far reaching impact on the group and the society at large.

• Fraud can deplete the working capital of any organization which will culminate ultimately to distress.

• Disengagement of workers and the associated social hazards to the employees and his dependant.

• Loss of confidence of shoppers, suppliers, creditors, contractors and shareholders on the organization and the industry.

FRAUD ALERT AND PREVENTION TIPS

1. Assume everybody can commit fraud under the appropriate circumstances.

2. Use your data of internal control to “think dirty” after which check out your suspicions.

3. Remember that good documentation does not imply something happened; only that someone stated it happened.

4. Pay attention to documents themselves and the supporting paperwork, observing the consistency of numbers, dates amount.

5. Consider the reasonableness of account balances and accounting entries, particularly adjustments

6. Develop relationships and pay attention to hints or rumors of wrongdoing. Observe up. Do not forget that persons are often torn between their ethical requirements and their reluctance to get involved. They seldom tell all they know within the first interview.

7. Check out hunches; first impressions are often right.

8. Be inquisitive; do not easily accept explanations, especially when you don’t understand them.

9. Use statistical sampling to force you to take a look at items you would not typically otherwise study

10. Search for patterns of bizarre transactions. (For those who’re stunned, it’s unusual!)

CONCLUSION

Because of the rising refrain for prosperity, overwhelming majority will not be prepared to sweat it on the market in making wealth. This has given rise to various sharp practises (fraud) leading to many being caught and jailed. Honesty, diligence, hard-work is the only path to enduring wealth with long-life. Don’t involve in any form of fraud!

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