Loss Prevention Policies - Assignment Example

? Loss Prevention Policies [Insert [Insert Unit and [Insert [Insert [Insert Loss Prevention Policies Abstract Fraud can be reduced or minimized through a comprehensive fraud prevention program that uses technology and forensics to track financial transactions. A comprehensive fraud monitoring system protects the assets of the company while improving the processes and standards for operation in the company. It divides tasks so that no one is in control of too many areas. Automation reduces interference and manipulation. A fraud hotline will greatly enhance the system by allowing for anonymous reporting. Introduction Modern organizations are faced by an ever-increasing threat of fraud, both internally and externally. Fraud continues to increase alarmingly with each passing moment recording a new or even more sophisticated form of fraud. The situation is made worse by an increasing adoption of information technology that networks and connects the information infrastructure in businesses. Hard economic times are also tempting employees to engage in fraud. This paper will review the benefits of a comprehensive fraud control program and give a conclusion at the end. Literature review Question One A Fraud is a big problem even for large established global corporations; consider the case of dell Computer Corporation. In 2007, it had to redo its financial reports between 2003 and 2006 due to a deliberate manipulation of figures to meet quarterly budgetary targets. John Rigas, former chairman and founder of Adelphi Communications and his son Timothy who served as the CFO (Chief financial Officer) at Delphi were convicted for massive fraud in 2007 (Stanek, 2007). This illustrates the extent of fraud in organizations where even the senior leaders who are supposed to be role models actually initiate and commit heinous acts of corporate fraud. However, a comprehensive fraud monitoring system can come in handy to help detect and therefore help an organization reduce its risk to fraud. Comprehensive fraud monitoring involves the use of technology that incorporates forensic techniques to analyze data and information paths regularly to detect anomalies, to detect fraudulent acts while there is still time to stop or mitigate the fraud. An effective fraud monitoring system is difficult to achieve by using the existing requirements and regulations necessitating the need for a comprehensive fraud monitoring system especially where senior management can be involved in fraud. A comprehensive fraud monitoring system continuously and constantly monitors happenings in a company’s financial system tracing the movement of cash, which can be used to trace back or detect potential fraud. A comprehensive system for fraud monitoring leverages the use of sophisticated methods of statistical analyses to thoroughly scrutinize a firms’ financial and other activity for acts of fraud, errors of omission and commission and misuse of the firm’s resources. It automated the process of analyzing a company’s financial data and information (Stanek, 2007). An automated system reduces direct human involvement and further helps shield the system from manipulation as well as improves the operations of the organization making them even more efficient (Schaeffer, 2008). An automated system also lowers the cost of hiring manpower that will be involved in the monitoring and auditing the financial and asset monitoring systems of a company. One B A comprehensive fraud monitoring system will benefit the firm in numerous ways as discussed below; The assets of this organization will be protected and safeguarded against arbitrary misuse and even theft by staff; physical assets as well as non physical assets such as intellectual assets. The system limits access to sensitive information to data that can be sold by an insider to competitors for instance. Access to financial resources and money is also controlled further increasing data security. It will also help reduce the chances of fraud by detecting and responding in good time to otherwise massive acts of fraud and scandals. A comprehensive fraud monitoring system allocates duties proportionately to relevant staff so a single staff or a few staff do not exercise too much control than is needed or effective over n area that pertains to a firm’s resources and assets (“Fraud prevention”, 2012). The system will enable independent and unhindered performance checking in the company by utilizing surprise checks to the system, audits, counting of inventory, physical asset counts. The fraud prevention system being software based reinforces and supports the set up systems and accounting procedures set up by the company. These activities will physically identify and verify compliance with the procedures and policies set up by the company and ensure there is accuracy in the counts and figures. A comprehensive fraud monitoring system provides for systems and channels for anonymous whistle blowing and reporting of suspected acts of fraud. This allows the relevant persons (external fraud investigator and internal audit) to get tips on acts of fraud without jeopardizing the identity and probably security of the whistleblower. This anonymity reduces chances for victimization and interference with fraud investigations and hence ensures better security (“Fraud prevention”, 2012). The comprehensive system allows for constant activity monitoring or as desired; access to data and information is monitored as access to data is restricted and only a few select people can access certain data. Access to the accounting system is also regulated especially from the danger of over passing by senior management who may have veto powers. A comprehensive fraud prevention system also adds value to an organization’ effort to reduce fraud as it has an educational component. This sensitizes the employees and staff on the dangers and harms of fraud and makes employees more aware of fraud, its symptoms and what to do in the event of a suspicion of fraud. It also forms the foundation for carrying out comprehensive investigations and will help pinpoint the culprit as information flow can be traced back. Overall, the system allows the company to improve its security; while adopting and implementing regulations and fraud prevention programs that include the Sarbanes-Oxley Act of 2002 (SOX) which is meant for public companies but equally effective for private companies. In the event of fraud investigation, the comprehensive monitoring system will reduce the time and resources committed to investigations as it uses forensic principles to investigate offenses that may have been long erased and provides more accurate results Question two Detective controls and independent checks can be implemented through controlling access to information and data. Impromptu checks, physical assets counts done without any regular pattern will help detect fraud. Documents and records should be backed up in soft copy by scanning or putting invisible identifiers for instance magnetic ink, a countercheck system for verifying that proper entries have been made. A comprehensive fraud prevention system should have a trail for back checking and racing sources of entries (Iyer & Samociuk, 2006). Basic systems for instance using stamps with a specific ink or specific pens to sign documents will reduce the fraud of forged signatures. Electronic documents must be approved or confirmed by having the relevant persons use a unique password or code, which can only be traced to them. Carrying out corruption and fraud profiling exercises from time to time will be a useful procedure in fraud prevention. Anonymous reporting channels where anyone can provide hints of fraud will help reduce fraud incidences as staff can be the most important line of defense against fraud, internal and external. Question Three A Fraud hotline is a communication channel that is confidential and anonymous for reporting fraud as a means for detecting, mitigating, and reducing fraud. A fraud hotline helps companies reduce financial losses and other losses to companies. A fraud hotline forms part of the detective controls that is one of the categories of internal fraud controls (“Fraud prevention”, 2012). A fraud hotline can be implemented by first creating awareness about the hotline targeting staff members, suppliers, customers, associates and other third party suppliers like service providers, and the public in general. Events that can be reported should be clearly defined to avoid inappropriate reporting for instance activities that are not legally considered criminal or wrong doing. This can be done during the awareness sessions (“Guidelines on implementing a fraud hotline”, 2005). The cost benefit analysis of implementing the hotline should be considered and appreciation understood that initially the company will incur costs; the line may be a toll free line for anonymous reporting but the savings in prevented acts of fraud are usually far much better. The system should however be cost effective so it does not outweigh the costs of implementing and running the system for instance a toll free telephone number, a secure e-mail address or a web based interactive database system or a letter box (“Guidelines on implementing a fraud hotline”, 2005) . The fraud hotline should be independent from interference or manipulation of an independent operator from the company is better. The company needs to consult an attorney at law concerning the legal provisions relating to the privacy and protection for the informer. The information’s confidentiality should also be assured; so a hotline should be private and confidential. The fraud hotline should be implemented with an independent tracking system safe from manipulation to follow up on the report during investigations and conclusion of the report. The fraud hotline should have an independent decision making process to determine what cases should be investigated depending on the case (“Guidelines on implementing a fraud hotline”, 2005). Question 3 B A comprehensive fraud prevention program is implemented successfully by first evaluating the existing systems and processes for fraud detection, prevention and mitigation. From this the needs of the company will be established and a suitable system developed. Using free fraud prevention CD_ROM such as the free one provided by the Association of Certified Fraud Examiners (ACFE) will identify gaps in the organization. Suitable software to prevent and monitor fraud such as ‘ActimizeTM’ is then installed in the company to automatically monitor and detect fraud. The system is then evaluated from time to time to improve on it further. An awareness and educational campaign forms part of the system to educate staff on the dangers of fraud and how it can be reduced. Conclusion Internal fraud is a big problem in organizations and can be reduced by implementing a comprehensive fraud prevention program. This program complements existing fraud prevention programs, reduces chances for fraud through early detection, and also reduces costs of hiring manpower like external investigators. It is essential in protecting a company’s assets, reducing fraud, increasing efficiency and ensuring standards and processes are run to specifications. The system is further improved through a properly implemented fraud hotline system that helps reduce fraud through timely detection and anonymous reporting. References Fraud prevention (2012, March 09) Retrieved from http://www.fraudessentials.com/index.php?option=com_content&view=article&id=12&Itemid=4 Guidance on implementing a fraud hotline (2005, August 16). Retrieved from http://www.fdic.gov/news/news/financial/2005/fil8005a.html Iyer, N., & Samociuk, M. (2006) Fraud and corruption: prevention and detection (pp. 60-64) Aldershot, ENGLAND: Gower Publishing Scaheffer, M. (2008) Fraud in accounts payable: How to prevent it (pp. 149-154) Hoboken, New Jersey: John Wiley and Sons Stanek, S. (2007) Adding up the key benefits of comprehensive monitoring retrieved from http://www.knowledgeleader.com/KnowledgeLeader/content.nsf/dce93ca8c1f384d6862571420036f06c/08480baf8f2d8858882573980078d46a/$FILE/Adding up the key benefits of comprehensive monitoring.pdf Read More