This week it’s International Fraud Awareness Week and our Forensic Accounting team would like to share some valuable advice about how to minimise potential risks and steps to consider if you suspect fraudulent activity has taken place.

As sales targets and budgets become harder to attain, the risk of fraud and/or inappropriate accounting increases. This may lead to accounting black holes, inaccurate management reporting and, worse still, the payment of erroneous bonuses and earn-out payments. Also, financial pressures may raise the risk of employee collusion with suppliers and contractors. Furthermore, the impact is unlikely to be restricted to accounting entries alone, with tax / VAT, cash flow and working capital implications.

What should you do to minimise risks?

  1. Understanding the business
  • Fraud mapping/identification i.e. what are the main risks of fraud inherent in the nature of the business
  1. Maintain strong internal controls particularly around cash.
  • Segregation of duties
  • Regular review and monitoring
  • Unscheduled audits
  1. Employees
  • Vetting and references
  • Train employees to prevent fraud
  • Regular appraisals and monitoring
  • Enforce holidays and monitor those employees who never miss their processes/procedures
  1. Fraud Policies and procedures
  • Implement a fraud policy
  • Ensure a whistleblowing hotline/process

Do you suspect an intentional ‘wrong-doing’ and need to conduct an investigation?

The procedures to follow in conducting an investigation can be a mine-field and must be adhered to in order to avoid unintentionally prejudicing the investigation and inadvertently offering a line of defence to the suspect. We are experienced in working with legal teams and our Forensic IT ‘partner’ to ensure the following do not present such issues:

  • The collation of email and electronic files – Electronic material that may either be used in a trial or other legal proceedings, or may be the subject of the legal process of disclosure, care must be taken to preserve the electronic material (including background metadata) in exactly the same condition as it was originally received;
  • Attracting or retaining privilege in documents – The existence of privilege may however be disrupted, or indeed lost, if the assignment is not structured appropriately;
  • Conducting interviews in the context of disciplinary, civil or criminal proceedings – Interviews need to be carefully planned and have regard to the context in which any evidence obtained will be presented; and
  • Know the rights of the suspects – Failure to respect their rights may inadvertently offer them a line of defence and render the client liable to claims for compensation, regardless of that individual’s culpability.

If you would like to speak to a member of our Forensic team please email kate@dswbhforensic.com or david@dswbhforensic.com or call 01928 378100.