Page 13 - CIMA SCS Workbook November 2018 - Day 2 Suggested Solutions

CIMA NOVEMBER 2018 – STRATEGIC CASE STUDY

Anti-fraud culture

This leads onto what is referred to as an anti-fraud culture, training all employees so that they are
aware of the signs and how fraud can manifest itself within our company. Then regular updates to
remind our employees to be vigilant will help prevent fraud.

Pre-employment checks

Making sure that Novak employs the right type of people will help reduce the likelihood of fraud
occurring and install an anti-fraud culture. The mission and corporate values that Novak has in
place at the moment are a good start, as they are likely to encourage individuals who want to help
society to apply. Going on from there the recruitment process should be such that staff involved
receive training to spot any signs that the individuals applying may not have the appropriate
character to represent Novak.

Whistleblowing policy

To help prevent fraud happening Novak should have in place a clear policy about whistleblowing.
It is one of the key ways to identify fraud, and it is important that Novak implements this and
makes sure it is part of the training policy to make sure that staff are aware of what they should
do if they believe malpractice has happened, is happening or will happen. Existence of this policy
at Novak can help reduce motive to commit fraud.

Risk awareness and a sound internal controls policy

Novak needs to make sure that we continue to review all areas of risk and identify any likely areas
for fraud, be it theft from factories or research facilities by staff, no matter how small. Fraud often
builds up over time, starting with some minor thefts that encourage motive – “I can get away with
this” – and builds into something more significant. Making sure that the staff are regularly
updated/reminded of their responsibilities can help control this.

Action

In terms of what action should be taken, the first step should always be investigation, however
the fraud is identified, from whistleblower to internal control breaches. Novak will always need to
establish the facts and answer some key questions like: What was the control lapse? How did it
occur? Who was involved? If it was some drugs stolen from the factory or the research centres
then for the controls to be circumvented it should require some form of collaboration, if not it
would suggest that the controls Novak has in place need to be reviewed. Segregation of duties to
make sure more people are involved is a key control. For example, someone accidentally telling
someone else about it or because one of the people involved realises that what they were going
to do is wrong and stops it. Similarly, for the sales team to successfully bribe customers then it is
likely that some form of authorisation was required to sign off expenses or anything else used to
persuade the doctors. It will also be important to establish the size of the fraud and how long has
the theft or the bribery been going on.

Once these have been discovered, action must be taken; if no action is taken it will encourage
motive within Novak and not reinforce the antifraud culture we must make sure exists. Whatever

74 KAPLAN PUBLISHING