Fraud Detection Programs

A Head of Internal Audit discovered several sets of invoices where money was paid for consulting services to companies in Liechtenstein, Jersey and the Middle East. These were, in reality, major commissions paid to agents (no questions asked) in order to obtain construction contracts. The auditor, in good faith, discussed the matter and implications with the Senior Vice President of Legal Affairs before presenting his report of findings to the Management Board. To his surprise (and shock) he was told by the company lawyer that there was no way that these findings would be presented to management – in fact he had full knowledge that such payments were being made.

Rather than finding fraud, he explained that it was the job of Internal Audit to ensure that senior management never had reason to be told formally about such transactions. If anything did get loose, they then could make a plausible denial that they were not involved and had no idea what was going on (but of course would take all necessary actions to investigate and discipline the people who had brought the company’s name into disrepute)

• KEY POINT: The board should endorse decisions on resource allocation for fraud detection and who should have responsibility to implement it, and the extent of the program.

Disclosures in the Fraud-i™ reporting module, as well as during "Understand the Risks" workshops using the Fraud-i™ tool have helped reveal a great deal of sensitive information regarding malpractice and unethical behaviour within organisations.

The results of these findings remain confidential and anonymous.