Fraud Experts Bolster Your Fraud Risk Management Capabilities

Reliable analysis aids in the protection of your organization

The legendary conman, Frank Abagnale once said, “We live in a time when if you make it easy for someone to steal from you, someone will.” He warned the public that, “You need to be a little bit wiser, a little bit smarter, and there’s nothing wrong with being skeptical.” At North American Forensic Accounting LLC, we couldn’t agree more. We’ve seen far too many organizations that were target-rich environments for fraudsters. From outside forces such as long-time vendors to long-term trusted employees, fraud risk many times resides where you least expect. Economic and emotional stress or perhaps simple greed can create temptation, add to that opportunity and rationalization and you have the recipe for fraud. The result is a steady drain on resources that begets more risk of even greater losses. Fortunately, NAFA can help with a broad range of anti-fraud services that enhance your security and help protect your bottom line.

Types of fraud your organization must guard against

Businesses competing in the global marketplace cannot afford losses due to fraud. Common types of fraud afflicting companies in the United States include:

  • Asset MisappropriationEmployees helping themselves to company property and funds. This type of theft includes check tampering and kiting, inventory theft, skimming cash, sales return fraud, theft of company services, expense reimbursement fraud, payment fraud, & commission fraud.
    • Vendor (Procurement) Fraud — These schemes may involve collusion between dishonest vendors and employees. Schemes include fraudulent billing, overbilling, double billing and price fixing.
    • Payroll Fraud — Various schemes enable someone to get paid without working, including ghost worker schemes, overtime fraud, and advance fraud.
  • Bribery – Commercial bribery can include schemes such as vendor kickbacks and bid rigging, however it can also encompass bribery of government officials in violation of the Foreign Corrupt Practices Act.
  • Financial Statement Fraud — Manipulation of an entities financial statements that are relied upon by various stakeholders (e.g. lenders & investors) usually to show an enhanced financial outcome or position. There are numerous ways this can be accomplished such as overstating revenues or asset values while understating expenses and liabilities.
  • Data & Intellectual Property Theft — As the value of an entity’s data and intellectual property grows so does the likelihood of it becoming a target for fraud. Fraudsters identify ways to take the data which is then sold or converted for their own use.

Any of these schemes could inflict severe losses on your company. And we can assure you that if you have undetected fraud in your organization now, that activity will continue until you stop it. NAFA’s fraud detection experts can show you how.

Why organizations ignore fraud

Despite the pervasiveness of workplace fraud, many managers resist the notion that it could happen in their company. Business owners and corporate officers routinely tell themselves:

  • We only hire honest people
  • We trust our people
  • If there was fraud, our internal audit would catch it
  • Our annual external audit would catch it
  • Our capable management would catch it
  • We have good internal controls
  • It hasn’t happened in the past
  • Fraud assessment is too costly especially when we don’t know if there’s a problem
  • We have more important issues to focus on

At NAFA, we’ve heard these objections time and again. Then, when we conduct a fraud risk assessment, we find suspicious activity. After decades of experience with fraud detection, we can confidently say that companies who don’t actively try to prevent fraud will be victimized by it.

Steps in the fraud risk assessment process

We begin the FRA process by identifying fraud risk factors present in the organization, its structure and its processes. A fraud risk factor is any circumstances that presents:

  • The industry in which an enterprise operates (market pressures) or the geographic locations in which it does business (differences in cultural norms)
  • An incentive or pressure to commit fraud perhaps due to unrealistic performance expectations or personal pressures beyond the influence of the organization
  • The opportunity to carry out the fraud because of the lack of internal controls or management oversight
  • Apathetic attitudes toward fraud or rationalizations for fraudulent actions facilitated by a toxic culture or real or perceived inequalities

These factors do not prove the existence of fraud, but fraud is more likely to occur in organizations where these factors are present.

One aspect of our risk assessment that other forensic services may overlook is the human element. At NAFA, we understand that controls are only as effective as the people implementing them. Therefore, we conduct fraud risk assessment interviews to understand how certain factors work within the organization to incentivize or discourage fraud. This data is crucial for helping our clients adjust their company culture to make it more ethical and less susceptible to fraud.

Once we identify the risk factors, we draw on our experience to build a catalog of schemes and scenarios that likely fit your organization’s circumstances. We construct a map of controls that should exist within your organization to prevent such schemes, contrasted with the controls your company has in place. Then we test the effectiveness of your controls in detecting and preventing fraud. We present a report on this effectiveness, along with recommendations for strengthening controls.

Ongoing benefits of vigilant fraud prevention

Preventing fraud is a sound business practice. By understanding that fraud can occur at many levels of your organization, you can develop a multi-faceted fraud prevention strategy, utilizing the three pillars of deterrence, detection, and response.

Important tactics can include:

  • Intentionally creating a corporate culture where fraud is taboo, through targeted policies and training
  • Hiring and promoting employees who fit the culture you are creating
  • Implementing internal controls that guard against fraud
  • Developing a system that monitors transactions and key indicators of fraud
  • Establishing a reporting mechanism, so employees feel comfortable blowing the whistle on fraud
  • Pursuing remedies that restore company assets and discipline employees for unacceptable behavior

We cannot understate the value of culture. Management may be unaware of a poor culture that can fan the flame of fraud, but rank and file workers are usually alert to such abuses. Imagine for a moment the corrosive effect on your ethical, hardworking employees, when they witness illegal self-enrichment that goes unnoticed and/or unpunished. Your leadership role demands that you take affirmative and decisive steps to stamp out malfeasance in your organization.

Working with the fraud experts at NAFA, you can develop an effective anti-fraud program that boosts worker productivity and morale. Partnering with NAFA, you can uncover ongoing fraud, improve your corporate culture, and reduce your risk of future losses.

Contact North American Forensic Accounting for a reliable fraud risk assessment

North American Forensic Accounting LLC provides fraud risk assessments to strengthen your business and minimize losses due to fraud. To learn more, call us at 347-286-4860, or contact one of our offices online to schedule an appointment. NAFA serves clients from offices throughout the United States, including New York City, Atlanta, Charlotte, Miami, Philadelphia, Pittsburgh, and the Tampa Bay Area.