Post on 11-Jun-2015
description
HOW FRAUDSTERS FOOL THE AUDITOR & DOES WHISTLE BLOWING FORM PART OF YOUR CORPORATE GOVERNANCE STRATEGY?
Jenny Reid 3rd Annual White Collar Crime Summit
for Africa 29 October 2013
PresentaPon Road Map • DefiniPons
• My area of experPse – People Risk
• How do we fool an auditor?
• Whistleblowing
COMMON DENOMINATOR
The crime vic*m's prayer “I thank Thee 1. I was never robbed before; 2. They took my purse but they did not take
my life; 3. They took my all, it was not much; 4. It was I who was robbed, and not I who
robbed.”
Ma_hew Henry, English commentator on the Bible and Presbyterian minister, 1662-‐1714
5
How Much Does Bribery Actually CostHow Much Does Bribery Actually Cost
Market Cap Before >$5.5B
After<$3.7B
33% Loss in Value
Plus $56M for the bribes
What is an audit? The general definiPon of an audit is an evaluaPon of a person, organizaPon, system, process, enterprise, project or product. The term most commonly refers to audits in accounPng, internal audiPng, and government audiPng, but similar concepts also exist in project management, quality management, water management, and energy conservaPon. In any audiPng the auditor perceives and recognizes the proposiPons before him for examinaPon, collects evidence, evaluates the same and on this basis formulates his judgment which is communicated through his audit report. Wikipedia
Who is an auditor?
Cost
Statutory
Forensic
Performance
Internal
Quality
Who is a whistleblower?
Client
Auditor
Buyer
Supplier
Accountant
Member of the public
What are the
COMMON DENOMINATORS ???
Staff
Suppliers
Management Clients
AuthoriPes
PEOPLE
The problem with human resourcesis that they are resources that are human,
with all that entails.
Truthfully, the human condition is by and large good.Most people are honest, sincere, responsibleand prepared to work hard for a fair shake.
But there are others that give people a bad name. These are the ones that lie, cheat and steal.
They are the businessman's worst nightmare for the damage they can cause.
These are the people you don't want working for you.
But how do you avoid them? You call us.
i factswe remove the people risk
www.ifacts.co.za General Enquiries: info@ifacts.co.zaTel: 011 609 5124 / 011 452 7233 Fax: 086 274 1884 Cell: 082 895 2478 (Sonya)
Can we fool an auditor? “Scamming the auditors is as simple as cut & paste” www.forbes.com
Case Study
iFacts
External
• Hardworking staff
• Need training
• Conference with team building activity
Good service • Nice guy
• Helpful
• Synergy in service offering
Supplier
Finances • Possible business
venture
• Rented a property from us
• Used his services again
• Discussed joint marketing strategy
MY AIM
HELP US ALL TO GROW and $$$
Finances • Introduction to my
suppliers
• Introduction to my clients
• Access to our marketing contacts and systems
• PROVIDED INFORMATION FREELY
Colleague
Supplier Tenant
PEOPLE
Colleague
Supplier
Tenant
THREAT PEOPLE
DID WE HOOK THE WORM?
YES
When should we have been aware of the risk?
• Gave good service • Nice guy • Paid his rent late • Reasons for delay varied from Pme to Pme • Did business with our clients and did not pay on Pme • His clients always let him down and this caused payment delays
• Never introduced us to his contacts • His suppliers were always unreliable
Did we verify any
informaPon?
NO!!
Finances • Loss of US$3 000
• Loss of reputation
• Hours of investigation
The Result
Finances • 6 fraud charges in New Zealand
• 6 months imprisonment in New Zealand for fraud
• 10 cases of fraud related charges in Gauteng
• 1 assault charge
• Various civil charges
• Shocking client references
Inves6ga6on Findings
Where did I go wrong?
0
10
20
30
40
50
60
70
80
90
100
Does your procurement
department ask for specific documents when a supplier wants to provide services to your
company?
Are the documents presented to the procurement
department every verified to ensure
that the informaPon presented is true and correct?
Does your procurement
department ask whether any
suppliers are related or associated to employees?
Does the procurement
department insist that employees of
contracPng companies are subjected to employee screening?
Is the employee screening policy of contractors assessed by your company to ensure that your company’s risk is taken care of?
Are contractor / supplier documents verified during their contract Pme with your company?
96
73 61
35
57
70
4
27 39
65
43
30 YES (%)
NO (%)
IFACTS VENDOR FRAUD SURVEY July 2012
Internal People
Management
Factors necessary for a successful whistleblowing programme
• Reward mechanism • Independent plaqorm • Ongoing awareness programmes • Provide feedback • ExecuPve commitment • Clear reporPng structure for receipt of reports • Commitment and buy in from ALL stakeholders
Staff
Suppliers
Management Clients
AuthoriPes
PEOPLE
HOW HAPPY ARE YOUR EMPLOYEES?
WHERE DOES INTEGRITY BEGIN & END?
ARE YOUR STAFF MOTIVATED?
People Risk
People Wellness
People Management
People Safety &
Security
Third Party Risk People Risk
Management Programme
A good employee wellness programme will include advice and recommenda6ons on: o Good Health o Stress management o Mo6va6on o Counselling services o Ethics & Fraud awareness o Personal financial advice o Security awareness
The people risk preven6on programme should include the following: ·∙ Employee screening ·∙ Integrity assessments ·∙ Truth verifica6on tests ·∙ Hot line ·∙ Third party / vendor verifica6on ·∙ People Risk Database
Online People Management tools include: ·∙ Induc6on training ·∙ HR climate & employee sa6sfac6on surveys ·∙ Appraisals and performance assessments ·∙ Recruitment strategy ·∙ Fraud inves6ga6ons ·∙ Exit interviews ·∙ Health and safety assessments & training ·∙ Security and risk assessments & training ·∙ Risk policies and procedures