Fraud Risk Management - what you need to know

By Gillian Lees

It’s probably fair to say that we all love a good fraud story – whether it is the current storm raging around Olympus or the Enron saga, frauds normally provide a heady mix of intrigue, villainous characters and outrageous actions.  I am reminded of an AICPA/CIMA/CMA Canada infocast a few years’ back when we were telling the story of a fraud perpetrated by a personal assistant at Goldman Sachs in London.  What listeners most wanted to know was how she got caught!

But what if it happens to your organisation?  What would you do?  Where would you start?  Would you even know that fraud had been perpetrated? This is where a new CGMA report called 'Fraud risk management: A guide to good practice' comes in. While we include insights from surveys, including the 2011 AICPA Forensic and Valuation Services (FVS) Trend Survey, we recognise that it is of little comfort to know that fraud is a major and growing problem across the world when you actually have to deal with it for real.

Much of the report therefore provides practical advice, tools and checklists relating to fraud prevention, detection and response.  For example, in relation to detection, there are extensive lists of some of the most common indicators of fraud - both warning signs and fraud alerts.  These can show that something is not quite right, such as complex transactions and unusual employee behaviour.  There are also tools to assist with identifying and analysing anomalies such as mathematical modelling.

Another particular feature of the report is the extensive guidance on fraud response.  This includes a description of all the key roles and responsibilities as well as a detailed response plan with flow charts setting out what action you need to take from the point that fraud is suspected right through to the subsequent investigation and interview procedures.  We include guidance on when to call in the police and how to deal with electronic evidence.

It’s probably not the most enjoyable report you will ever have to read and in an ideal world, I’d like to say that you should never need it.  But it should make a useful and practical addition to your business bookshelf.  It might even save you a lot of money!