Fraud Prevention and Detection
For fraud to occur, there is usually an inter relation of three elements:
• an incentive or pressure to commit fraud;
• a perceived opportunity to commit fraud; and
• the ability to rationalise the fraudulent action.
Perceived opportunity to commit fraud usually involves:
• one or more weaknesses in the processes or procedures to protect the individual's or the entity's assets from the risk of loss;
• the perpetrators technical skill or ability to commit the fraud;
• and the perception of a low risk that the fraud will be detected.
Fraud risks can be within an individual’s or entity’s activities/ processes (internal risk factors) and outside of an individual’s or entity’s activities/ processes (external risk factors).
Entities that are well run, with good governance structures and systems, prosper as they attract investors whose support can finance faster growth.
The incidence of fraud can be costly and not only involves the financial loss directly associated with the fraud. It also involves reputational damage and the resulting loss of business, lost productivity and the costs associated with investigating and resolving the factors that allowed the fraud(s) to occur.
The 2016 ACFE Report to the Nations on Occupational Fraud and Abuse Global Fraud Study (“The Study”) indicated 23.2% of the cases reported involved losses of at least USD$1million and the median duration (the amount of time from when the fraud commenced to when it was detected) for the fraud cases reported was eighteen (18) months. Occupational frauds can be classified into three primary categories: asset misappropriations, corruption and financial statement fraud. Asset misappropriations occurred in 83% of the cases in the study with a median loss of USD$125,000. Financial statement fraud occurred in 10% of the cases reported but had the greatest financial impact, with a median loss of USD$975million. Corruption schemes were reported in 35.4% of cases with a median loss of USD$200,000.
The presence of proactive anti-fraud controls and detection methods such as: Independent Review and Monitoring Of An Entity’s Systems , Inspection of Assets, Inventory Counts and Inspection, Cash Counts and Point Of Sale Reconciliations, Investment Securities Counts and Inspections, Trade Payables or Supplier Reconciliations, Trade Receivables Reconciliation, General Ledger Account Reconciliation, Jamaica Tax Return Reviews that are maintained and monitored throughout the year results in lower fraud losses and shorter fraud duration than passive anti-fraud controls and detection methods, such as an external auditor's end of year financial statement audit (see The Error of Relying On The End Of The Year Financial Statement Auditor as the Sole Method to Prevent and Detect Fraud), that are not the results of efforts within the organisation to detect fraud. AMCS assists entities with designing, implementing and monitoring systems to reduce the risk of fraud and fraud losses see Fraud Prevention and Detection Advisory Services. AMCS also provides Fraud Investigation (Fraud Examination) Services
Contact AMCS Jamaica Limited for Fraud Prevention and Detection Services