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Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
Why Auditors Do Not Discover Fraud
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Why Auditors Do Not Discover Fraud

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Mr. Ali AlMuwaijei, Board Member of the UAE IAA, delivered the opening remarks with presentation titled "Why auditors DO NOT discover Fraud" where he discussed the fraud triangle and the role of …

Mr. Ali AlMuwaijei, Board Member of the UAE IAA, delivered the opening remarks with presentation titled "Why auditors DO NOT discover Fraud" where he discussed the fraud triangle and the role of internal auditors in looking for the red flags and provided many statistical data about the fraud globally,

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  • 1. Why auditors DO NOT discover Fraud By Ali Bin Mohammed AlMuwaijei Board member, UAE IAA, United Arab Emirates
  • 2. Why auditors DO NOT discover Fraud? 2
  • 3. Anyone heard of CIA? Anyone heard of CPI? Corruption Perception Index 3
  • 4. Corruption Perception Index - 2012 1. 1. 1. 2. 3. 4. 5. 5. Denmark New Zealand Finland Sweden Singapore Switzerland Australia Norway 90 90 90 88 87 86 85 85 169. Iraq 170. Turkmenistan 170. Uzbekistan 172. Myanmar 173. Sudan 174. Afghanistan 174. North Korea 174. Somalia Scale from 0 (highly corrupt) to 100 (very clean). Transparency International 4 18 17 17 15 13 8 8 8
  • 5. Rank Country Score 1 Denmark 90 1 New Zealand 90 1 Finland 90 5 Singapore 87 27 Qatar 68 27 United Arab Emirates 68 54 Malaysia 49 79 Sri Lanka 40 88 Thailand 37 94 India 36 118 Indonesia 32 5
  • 6. Report to the Nations On occupational FRAUD and abuse 1,388 cases Patterns of fraud are however consistent Note: This data is based on an ACFE study of 1,388 cases of occupational fraud in 94 countries- 2012. 6 6
  • 7. ACFE's 2012 Report to the Nation: What is the Percentage of revenue lost to Fraud? 3% 5% 7% 10% 7
  • 8. Summary of Report Findings Losses Organizations Affected Indicators Typically 5% of annual revenue Mostly those lacking anti-fraud controls Tell-tale exists for fraud perpetrators World-wide USD 3.5 trillion Controls exist, but not implemented Living beyond financial means 8 8
  • 9. The Fraud triangle According to Donald Cressey, three elements must be present for fraud to be executed: a. Pressure/ motivation usually individual characteristics and situational factors b. opportunities eg available targets ie lack of controls c. rationalization/justification/ neutralization This is known as the fraud triangle
  • 10. The Fraud triangle
  • 11. Pressure/ Motivation : 1. Greed 2. Gambling 3. Financial strain - personal 4. Financial strain - business 5. Maintaining own/ family business 6. Influenced/ implicated by others
  • 12. Pressure/ Motivation (Cont.): 7.Pleasing others 8. drug/alcohol addiction 9. Financing new business interests 10. Terminal illness 11. Dissatisfaction with employer
  • 13. Opportunity 1. Weak or non-existent internal control 2. Lack of segregation of duties 3. Highly decentralized organization 4. Lack of knowledge/awareness
  • 14. Opportunity 5. Opportunity is the perception by someone believing they can commit a fraud without getting caught 5. Management control and influences “opportunity” more than any other factor in the Fraud Triangle
  • 15. Rationalization: 1. Intention to conduct a reasonable business 2. Intention to repay 3. Influenced/ implicated by others 4. Underpaid by employer 5. Helping clients 6. Tone at the top: poor corporate governance
  • 16. Difference between Audit and Fraud Audit • System / Process Improvements • Individual/Gangue • Improvements • Prosecution Months 16
  • 17. Auditors are policemen How to deal with this issue? Separate Audit and Fraud 17
  • 18. What Names Would You Use for the Department? • Incident Management Department (IMD) • Fraud Prevention Department (FPD) • Internal Affairs & Anti Fraud. (IAAF) • Internal Affairs & Anti Fraud Dept. (IAAFD) • Anti Fraud & Internal Affairs Dept. (AFIAD) 18
  • 19. Audit and FPD reporting to ONE? Disadvantages Advantages • Alteration to audit plan • Director is seen wearing two hates • Audit detect fraud and pass to FPD • Use of Audit for initial investigation • Some overlapping of investigations • Communication problems • Supplement resource when needed (IT, Technical and auditors) between GIA & FPD • Business unit mix messages 19
  • 20. Fraud Prevention Department Role and Responsibilities Charter Fraud Prevention policy Code of conduct 20
  • 21. Fraud Prevention Department • Organization Structure requirement – Legal/IT • FPD Compensation – – – – Salary Risk Allowance Bonus Insurance 21
  • 22. Interaction with Local/ Intl. Authorities • State Security • Courts • Police • Ministries/Embassies • Prosecution • Interpol 22
  • 23. Fraud Prevention Department Whistleblowing system 23
  • 24. Setting a Whistle Blowing System • Should you outsource or in source the system • Protection system • How far you can protect the identity of individuals • Reward system for informers 24
  • 25. Initial Detection of Occupation Fraud ©2012 Association of Certified Fraud Examiners, Inc. 25
  • 26. Sources of Tips ©2012 Association of Certified Fraud Examiners, Inc. 26
  • 27. Lessons Learnt 27
  • 28. Thank You Ali.almuwaijei +97150 7677757 28

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