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Deloitte Enterprise Risk: Issue 4

Fraud risk - Prevention and detection


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Published: August 2012

Featured content: Fraud risk - Prevention and detection

  • Changing the traditional control mode:  Creating a sound internal control environment to prevent and control corruption risks
    Over the past few years, several ministries in China have been proposing a punishment and prevention mechanism for anti-corruption. How to establish such a framework and how to integrate it with government and business activities have since become the focus of considerable interest. In August 2011, the Ministry of Supervision of the Central Commission for Discipline Inspection and the National Bureau of Corruption Prevention of China drafted the "Guidance on Strengthening the Prevention and Control of Corruption Risks " for comments, stating that prevention and control should be comprehensive and focusing on key areas at the same time, i.e. highlighting key targets, key areas, key processes and key tasks. This article provides an introduction to the methodology and  the steps to preventing and controlling corruption risks (including risk identification, risk assessment, risk response, continuous monitoring and improvement), as well as relevant experience in the area.

  • Management of fraud risks
    All businesses are subject to fraud risks.  Serious frauds may lead to the collapse of the entire organization, huge investment losses, tremendous legal fees, imprisonment of key personnel and the erosion of confidence in capital markets. In addition, executives engaging in fraud activities will adversely impact an organization's reputation, brand and image.  In this article, we discuss how  board of directors, executives and internal auditors can combat fraud within an organization.  To properly handle fraud risks, these four principles need to be followed:
  1. having an appropriate fraud risk management oversight and expectations (Management)
  2. ensure confirmation and assessment of fraud exposure (Risk assessment)
  3. having an appropriate process and procedures to manage the exposure (Prevention and detection)
  4. ensure charge with fraud is treated in a timely manner and appropriate corrective measures are taken.
  • Use of data analysis in fraud investigation and prevention
    Many fraud cases are hard to be detected, reflecting the challenges faced by the traditional audit approach. In the early stage of development, enterprises are small in size, and can operate smoothly relying on manual processes. However, as the business expands, transactions get more complex and the growing streams of data continue to flow through, there comes a need for an information system in order to improve operating efficiency.  At this point, an internal auditor's familiarity and mastery of the system will directly impact the effectiveness of the audit.  We will discuss the fraud investigation and prevention technology that embeds the specific business logic unique to an organization and its audit focus into the data analysis tools for a timely and comprehensive monitoring.  By introducing several fraud cases, this article also looks at the limitation of the traditional audit methodology and provides an overview of several data analysis methods.

  • Detecting management fraud
    The impact of management fraud matters much to enterprises but management fraud is hard to prevent, detect and expose internally.  In order to sustain development however, enterprises have to be well-prepared for such potential risk challenges.  The author, a Senior Manager of Deloitte in Tokyo, will explore how to build a robust organization to manage the risk of management fraud with contents covering management fraud trends and definition, how to detect it and its mechanism, case study and how to identify and prevent it.  

  • Searching for potential fraud: Duplicate payments audit
    Duplicate payments audit is an excellent value-added service which can help clients save their treasury. In addition to introducing the main reasons for the occurrence of duplicate payments, we also discuss the steps involved in a duplicate payments audit:

    Step 1 - assessing payment process
    Step 2 - deciding type of report
    Step 3 - obtaining data and creating reports
    Step 4 - determining the most appropriate tools
    Step 5 - completing analysis of duplicate payments.

  • Automated analysis platform
    On an automated data analysis platform, data from the daily operation of a company are collected and screened for study of business phenomenons, trends, issues and risks worthy of concern by the management through simulation analysis of various scenarios, This article details the function and role of each module on the automated analysis platform. In addition, it  describes the benefits of an automated data analysis platform, as well as the critical success factors.

  • Fraud investigation of subsidiaries of Japanese enterprises in China
    From August to October 2011, Deloitte China's Enterprise Risk Services organized a series of seminars on fraud risk response targeting subsidiaries of Japanese enterprises in China.  An anonymous questionnaire on fraud investigation was also performed on site, with its contents similar to a survey conducted by Deloitte in Japan in 2006 among the listed Japanese companies covering questions on whether fraud was detected and the average loss amount in each case,  types of fraud cases that have occurred,  working experience of the personnel who conducted the fraud, its motive and how the fraud was detected.  Drawing upon the results, the fraud status of the subsidiaries were analyzed, in addition, the findings were also compared with the 2006 survey, with differences between the two surveys examined at the same time.

Multivariate perspective from Deloitte experts

  • Procurement fraud and corruption: Risk prevention
    All companies are likely to encounter the risk of fraud and corruption in its procurement process, resulting in serious reputation and financial damages. Traditionally, Asia is regarded as one of the areas lacking transparency, and with more and more companies choosing suppliers in the region, we have seen fraud and corruption cases in the procurement process increase accordingly. The author, an expert from our Forensic and Dispute Services team,  introduces the method for enterprises to manage these risks and how they can be minimized through appropriate measures even if the they cannot be completely eliminated.

Study Room

  • Corporate Social Responsibility and Sustainable Development Report
    In  a Corporate Social Responsibility (CSR) or Sustainable Development report, companies disclose information of their efforts in Environmental, Social and Corporate Governance (ESG),  collectively referred to as "non-financial reporting performance information". This article describes the definition of a CSR or Sustainable Development Report, as well as the reason of issuance, its main content  and reporting method.

Risk management terminology

 "Financial fraud"

Internal control practices

Topics covered are as follows:

  • Short stories on risk management in the insurance industry (3) – "Zero cash" in the insurance premium collection
  • Internal control practices (7) – Inventory management

Related links

  • Enterprise Risk Services
    Learn how we can help you better identify, measure and manage risk and enhance the reliability of your control system and procedures
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