FOOLING THE AUDITOR

Jenny ReidSeptember 2014

What is an audit?The general definition of an audit is an evaluation of a person, system or process.

An auditor exams, collects evidence and evaluates before making a judgement call via an audit report.

Who is an auditor?

Cost

Statutory

Forensic

Performance

Internal

Quality

Who is an auditor?

Cost

StatutoryForensic

PerformanceInternal

Quality

Can we fool an auditor?

“Scamming the auditors is as simple as cut & paste”

www.forbes.com

HUMAN

REACTIVE

HOW DO PEOPLE FOOL THE AUDITOR?

Internal• Financial pressures during

economic crisis have led to an increase of fraud

• Employees pose the greatest fraud threat in the current economy

• Layoffs are affecting organizations' internal control systems

• Fraud levels are expected to continue rising.

HOW DO PEOPLE FOOL THE AUDITOR?

Staff• False representation

• Fails to disclose information

• Corruption

• Abuses a position of trust

HOW DO PEOPLE FOOL THE AUDITOR?

Staff• Compromising customer or

payroll data • Theft • Submission of inflated

expenses• Can also be linked to serious

and organised criminal network or terrorist financing.

FinancesEXTERNAL• Dishonest vendors in

bid-rigging schemes – tender fraud

• Billing the company for goods or services not provided

• Demanding bribes from employees.

HOW DO PEOPLE FOOL THE AUDITOR?

FinancesEXTERNAL• Dishonest customers -

submit bad checks or falsified account information for payment

• Attempt to return stolen or knock-off products for a refund.

• Security breaches and thefts of intellectual property perpetrated by unknown third parties.

HOW DO PEOPLE FOOL THE AUDITOR?

FinancesEXTERNAL• Hacking• Theft of proprietary

information• Tax fraud• Bankruptcy fraud• Insurance fraud

HOW DO PEOPLE FOOL THE AUDITOR?

Where could I go wrong?

People Risk

ManagementProgramme

Anti- FraudBehaviour

Ethics Policies & Training

Internal Controls

ProactiveAssessments

Fraud Prevention Strategies

Executive

Security /

Loss Control

HR Procurement

EmployeesPast

PresentPossible

Contract LabourVendors

People Risk Management Programme

Executive

Security /

Loss Control

HR Procurement

Leaders commit to

doing it right

Integrity Assessments

Communicate company

policy

Understand staff risk & assist with

training

Anti-Fraud

Behaviour

Executive

Security /

Loss Control

HR Procurement

Annual review of

Ethics Policy

Internal Communication

Strategy

External Communication

Strategy

Ethics Policies & Training

Executive

Security /

Loss Control

HR Procurement

Manage finance

documents & reconcilations

Insist leave is taken & staff

back each other up

Unannounched spot checks

Review policies & procedures

annually

Regular inventory checks on

finance / bank documents Internal

Controls

Executive

Security /

Loss Control

HR Procurement

Whistleblower Programme

Employee Assistance

Programme

Awareness Programmes

Employee Satisfaction

Surveys

Proactive Actions

Executive

Security /

Loss Control

HR Procurement

Do you want to jump????