1. Director - Audit and Assurance
Vishal Modi
Director - Audit and Assurance

2. Avoiding Fraud This session will cover:
“At any given moment, there
is a certain percentage of the population that’s up to no good”
J. Edgar Hoover
Director of the Federal Bureau of Investigation (FBI), USA
This session will cover:
How you can protect your organisation
Why effective internal controls are important

3. Misappropriation of Assets Fraudulent Financial Statements
Corruption
Fraudulent Financial Statements

4. Fraud Tree Source: Association of Certified Fraud Examiners Fraud Tree
Misappropriation of Assets
Cash
Theft of cash on hand
Theft of cash receipts
Skimming
Sales/Services
Receivables
Refunds
Cash larceny
Fraudulent disbursements
Billing
Payroll
Expense reimbursement
Cheques/EFT
All other assets
Misuse
Larceny / Theft
Fraudulent Financial Statements
Net assets/Net Income
Understatement
Overstatement
Corruption
Conflict of Interest
Bribery
Illegal gratuities
Economic extortion
Source: Association of Certified Fraud Examiners

5. Fraud Triangle Incentives/ Pressures Fraud Triangle Attitudes/
Personal financial problems
Gambling problems
Desire for status symbol
Family pressures
Need to meet with budgets
Incentives/
Pressures
Need to meet with
fundraising targets
High turnover of staff
“I am only borrowing the money”
Lack of segregation of duties
Fraud
Triangle
“I am entitled to the money”
Significant cash transactions
“I am underpaid”
Lack of controls
Attitudes/
Rationalisation
Opportunities
“I have to steal to provide for my family”
Informal governance

6. How you can protect your organisation
It is important that you consider these aspects of your organisation:
Ethical culture
Communication flow
Formal policies and procedures

7. Internal control weakness that contributed to fraud
Source: Report to the Nations: Asia-Pacific Edition, Association of Certified Fraud Examiners

8. Steps for fraud prevention
Be clear about the ethical values, e.g. honesty and accountability – set the “tone at the top” on fraudulent behaviour
Be open about the possibility (risk) of fraud, even if it is only a small risk – if you don’t acknowledge that fraud happens, you are not going to find it
Identify the types of fraud you may be at risk from – conduct a risk assessment
Understand the red flags that act as a warning of possible issues – e.g. behavioural or lifestyle symptoms, accounting & analytical anomalies

9. Prevent fraud with proper internal controls
Develop sound written policies and procedures – important they are clear about roles and responsibilities, and what steps must be taken, including:
detailed and robust financial procedures, information technology & security
fraud prevention policy
human resources procedures
Promptly report any suspected fraud or other criminal activity that takes place, and take steps to minimise any loss and prevent it from reoccurring

10. Why effective internal controls are important
Implementing effective internal controls is critical to reducing your organisation’s exposure to fraud risk
Reviewing the effectiveness of internal control is an essential part of the Board’s responsibilities; whilst management is accountable to the Board for developing, operating and monitoring the system of internal control and for providing assurance to the Board that it has done so
The Board cannot rely solely on a process of internal control embedded within the organisation’s operations, but should regularly receive and review reports on internal control from management

11. Why effective internal controls are important
As well as a regular review, do undertake an annual assessment
Risk management and controls are not to be seen as a burden on business, rather the means by which business opportunities are maximised and potential losses associated with unwanted events reduced
Develop a successful system of internal control that is responsive to change

12. About me – Vishal Modi
Expertise in providing commercial entities and membership based organisations with expert advice and guidance with their assurance requirements
Focused on building strong partnerships with clients
Passionate about advising and implementing efficient risk management controls and affecting long term sustainable improvements in business outcomes
Joined Hill Rogers in 2005 and appointed Director in 2012
Bachelor of Commerce
Member of Chartered Accountants Australia and New Zealand
Registered Company Auditor
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13. Any questions?