The webinar discussed the internal auditor's role in preventing issues like fraud and inappropriate transactions. It provided 4 examples of situations encountered by the presenters: (1) a petty cash fraud where one employee stole over $60k, (2) questionable expense claims by a CFO that lacked proper oversight, (3) an unacceptable procurement process where fake invoices were used, and (4) a CEO misusing credit cards and contracts without proper approval. For each, it described what went wrong, what could have been done to prevent it, and how internal auditors can help by reviewing processes, performing audits, and training on red flags. The presenters then highlighted common red flags for auditors to watch out for.

1. Welcome to Today’s Webinar:
& the
Internal Auditor’s Role

2. Ground Rules
Questions
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3. Presenters
André Auger, CGA, CFE
Government Services Advisor
aauger@welchllp.com
www.welchllp.com
Twitter: @andreauger
ca.linkedin.com/in/andreauger
Colin Stobo, CA, IFA
Consultant, Cobo Accounting Services Ltd.
cstobo@rogers.com
ca.linkedin.com/in/cstobo

4. Introduction
• The role of the internal auditor is increasingly
complex.
• Changes have been coming at a rapid pace
since the implementation of the New Policy on
Internal Audit in 2006.
• Expectations are high and varied.
• Not limited to fraud: also includes inappropriate
transactions, weak internal controls, lack of
oversight, due diligence.

5. Introduction
• In this webinar, we will provide you with live examples
encountered by Colin & André.
• For each of the 4 examples, we will provide:
o Description of the situation
o Where breakdown occurred
o What could have been done to prevent
the breach
o How IA can help

6. Example 1 – Petty Cash
Description :
•
Petty at multiple locations
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An employee would administer petty cash &
prepare the reimbursement request
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A manager would review the supporting
documentation & approve request by signing it
•
Employee would fax/email pdf of approval sheet
only to accounting

7. Example 1 – Petty Cash
• Employee used a photocopy of the
signature block and used it for additional
reimbursement requests
• The employee made false claims of over
60K over 3 years
• This was identified by internal audit in
the spring of 2012

8. Example 1 – Petty Cash
Where Breakdown Occurred:
• The approval process – it was a manual
process, allowing the employee to
fax/pdf the approval to accounting
without accounting ever seeing the
original documentation
• Accounting did not perform a second
layer of review

9. Example 1 – Petty Cash
What could have been done:
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Automate the process
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Require submission of actual documentation
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Regular internal audits of the petty cash
How could IA help
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Process and Procedure Review
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Perform audits
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Train staff and organization about red flags

10. Example 2 – Expenses
Background:
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Questions were raised about the reasonableness
of a government agency’s CFO expenses
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The CFO incurred approximately 100K in travel
expenses per year
•
Travel policy was very lax in terms of what
could/couldn’t be claimed & what documentation
needed to be submitted to support the expense
•
Items purchased were not allowed under policy but
were approved by CEO

11. Example 2 – Expenses
• Limited information was provided with
expense claims
• It was impossible to determine if the
expenses were incurred for the benefit of the
agency

12. Example 2 – Expenses
Where Breakdown Occurred:
• Approval process - Accounting took
the view that if approved by CEO
they could not question expenses &
didn’t perform 2nd level of review
• Policies lacked guidance

13. Example 2 – Expenses
What could have been done:
• Tone at the top
• Proper vetting of executive level
expenses
• Adequate policies that provide
detailed guidance on expenses and
require detailed support

14. Example 3 – Unacceptable
Procurement Process
Description:
• The Real Property Department has worked
with a minimum of 3 suppliers to have
fictitious invoices issued & processed for
payment of materials for funded projects.
• Intent was to avoid lapsing of Crown funding.
• No evidence that individuals benefitted
personally, hence could not conclude that a
fraud had occurred.

15. Example 3 – Unacceptable
Procurement Process
Where Breakdown Occurred
• 3 individuals were terminated. Dealings with
the 3 suppliers were suspended.
• Breakdown resulted from a lack of controls
and oversight pertaining to delegation of
authorities.

16. Example 3 – Unacceptable
Procurement Process
What could have been done:
• clear delegations of authorities (signing
thresholds), training of Finance staff, testing
of cut-off at Y/E by Finance, confirmation of
Y/E fund balances with the provider of funds.

17. Example 4 – Misuse of Acquisition
Cards & Contracts
Description:
• CEO of an Agency used a corporate credit
card for personal use & gave himself a
salary increase by amending his
employment contract without proper Board
approval.

18. Example 4 – Misuse of Acquisition
Cards & Contracts
Where Breakdown Occurred
• Staff were directed to process payments &
contract amendments.
• CEO was dismissed; restitution agreement
was signed and all monies were returned.

19. Example 4 – Misuse of Acquisition
Cards & Contracts
What could have been done:
• What could have been done: proper
delegation of authorities, whistleblowing
mechanisms in place, fraud hotline.

20. Red Flags – What to watch for
Limited or no documentation, including access
Poor or inconsistent documentation
Extensive use of spreadsheets
Limited or lack of oversight
Tone at the top
Under resourced organization
Staff turnover
Custom IT systems, electronic signatures

21. Q&A
André Auger, CGA, CFE
Government Services Advisor
aauger@welchllp.com
www.welchllp.com
Twitter: @andreauger
ca.linkedin.com/in/andreauger
Colin Stobo, CA, IFA
Consultant, Cobo Accounting Services Ltd.
cstobo@rogers.com
ca.linkedin.com/in/cstobo