Page 165 - SBL Integrated Workbook STUDENT 2018

Management internal control systems and reporting

Fraud risk management strategy

In common with any other type of risk, a risk management strategy needs to be
developed for fraud. This strategy should include three key elements:

 Fraud prevention

 Fraud detection

 Fraud response.

5.1 Fraud prevention

Some specific examples of fraud prevention include:

 An anti-fraud culture

 Risk awareness

 Whistleblowing

 Sound internal control systems

5.2 Fraud detection

Most frauds are discovered accidentally, or as a result of information received
(whistleblowing).

Some methods of discovering fraud are:

 Performing regular checks, e.g. stocktaking and cash counts.

 Warning signals or fraud risk indicators (see previous section).

– Failures in internal control procedures.

– Lack of information provided to auditors.

– Unusual behaviour by individual staff members.

– Accounting difficulties.

 Whistleblowers.

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