Can you fool an auditor?
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Presentation given at 3rd annual White Collar Crime Summit for Africa in Victoria Falls, Zimbabe
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Can you fool an auditor?
- 1. 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
- 2. PresentaPon Road Map • DefiniPons • • My area of experPse – People Risk How do we fool an auditor? • Whistleblowing COMMON DENOMINATOR
- 3. 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
- 4. How Much Does Bribery Actually Cost Market Cap Before >$5.5B 5 After <$3.7B 33% Loss in Value Plus $56M for the bribes
- 5. 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, c ollects evidence, evaluates the same and on this basis formulates his judgment which is communicated through his audit report. Wikipedia
- 6. Who is an auditor? Forensic Cost Quality Performance Internal Statutory
- 7. Who is a whistleblower? Buyer Client Member of the public Supplier Accountant Auditor
- 9. Staff AuthoriPes Clients Suppliers PEOPLE Management
- 10. The problem with human resources is 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, responsible and 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.
- 11. Can we fool an auditor? “Scamming the auditors is as simple as cut & paste” www.forbes.com
- 13. • Hardworking staff • Need training • Conference with team building activity
- 14. Supplier Good service • Nice guy • Helpful • Synergy in service offering
- 15. Finances • Possible business venture • Rented a property from us • Used his services again • Discussed joint marketing strategy
- 16. MY AIM HELP US ALL TO GROW and $$$
- 17. Finances • Introduction to my suppliers • Introduction to my clients • Access to our marketing contacts and systems • PROVIDED INFORMATION FREELY
- 18. Colleague Tenant PEOPLE Supplier
- 19. Colleague THREAT PEOPLE Tenant Supplier
- 20. DID WE HOOK THE WORM? YES
- 21. 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 • • • • • •
- 24. The Result Finances • Loss of US$3 000 • Loss of reputation • Hours of investigation
- 25. Inves6ga6on Findings 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
- 26. Where did I go wrong?
- 27. IFACTS VENDOR FRAUD SURVEY July 2012 100 96 90 73 80 70 60 50 40 30 20 10 0 4 27 Are the ocuments d presented to the procurement 65 61 39 35 70 57 43 30 Does your Does your Does the Is the employee Are contractor / procurement procurement procurement screening policy of supplier documents department ask for department ask department insist contractors assessed verified during their specific documents department every whether any that employees of by your company to contract Pme with when a supplier verified to ensure suppliers are related contracPng ensure that your your company? wants to provide that the informaPon or associated to companies are company’s risk is services to your presented is true employees? subjected to taken care of? company? and correct? employee screening? YES (%) NO (%)
- 31. 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
- 32. Staff AuthoriPes Clients Suppliers PEOPLE Management
- 33. HOW HAPPY ARE YOUR EMPLOYEES?
- 34. WHERE DOES INTEGRITY BEGIN & END?
- 35. ARE YOUR STAFF MOTIVATED?
- 43. People Risk Third Party Risk People People Risk Management Programme People Safety & Security Wellness People Management
- 44. 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
- 45. 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
- 46. 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