Title: Utilizing Peer Reviews for External Quality Assessments
1Russell Third, Director Internal Audit,
Department of Labour
2Session Overview
- The Ripple Effect
- Who is affected by fraud?
- What can you do?
- How fraud hurts you and you organization (Video)
- Questions
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6The Smartest guys in the roomIf you have not
seen this movie get it out or buy it (29)It
shows the effect on the people of Enron and those
associated with it.
765 Billion
24 days
0 Bankrupt
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9Enron quite a ripple!!!!
10The Ripple Effect
Public/Stakeholders
Auditors
Supplier/Contractors
Senior Management
Fraudster
Fraud
Family/Friends
Colleagues
Management
Legislator interest
11Fraudster
- Confused
- Scared
- Realisation of the effect on the innocent
- Possible loss of freedom
12Family/Friends
- Relationships severely tested
- Range of emotions shame, distressed, angry
- Innocent victims who will suffer (sometimes for a
long time) - Kids at school
13Colleagues
- Sense of betrayal morale plummets
- Similar emotions hurt, violated, anger
- Blame
- Can I trust anyone?
- Possible realisation of red flags
- I never noticed that gap
14Management of area where fraud occurred
- Extra work
- Concern about control gaps
- What allowed it to occur?
- Was I responsible?
- How do we fix it?
15Senior Management
- Extra work and costs
- Ensuring a robust investigation
- Managing reputation/political aspects
- Making sure the cause is identified
- Ensuring fixes occur
16Supplier/Contractors
- Trust
- Doing business with you
- May be the subject of jokes
- If collusion, negative effects on both
17Public
- Reputation
- Shareholder/Stakeholder confidence
- Possible lack of investment
- Call for greater accountability
- heads must roll
18Hurricane Katrina
- Hard done by stories many were total lies
- Bogus phishing websites (Mirroring Red Cross for
example) - Homes being deliberately damaged to get more help
19Legislator interest
- Possible increased legislation or watchdog
interest - More onerous (costly) compliance
- Increased focus for auditors
20What can you do now?
- Good control environment - strong tone from the
top - Well designed and imbedded controls
- Methods to know they are (or are not) working
- Right people (and you checked previous
employment), right jobs
21What can you do now?
- Keeping good people reward, recognition,
training - Clear organisational approach to wrong doing -
zero tolerance - Clear, well communicated policies and procedures
- Robust investigation procedures
22Post fraud Management need to
- Understand and deal with morale issues
- Understand the financial situation
- Plan how to get out of the mess
- Communicate with staff - including the
consequences of committing fraud - Ensure vulnerabilities and systemic holes are
closed
23For you - get good advice
Need to investigate thoroughly (and sometimes in
the background)
Natural Justice Peoples Rights
Getting the right balance
24Human Resources and Legal
- Ensure you brief them early
- Get someone working alongside you giving good HR
and Legal advice - If you dont - potential Personal Grievance or
worse, the clearly guilty get off (and are paid
for their trouble)
25Communications
- Internal and External Communications
- Consider up front in your Fraud Policy how you
will deal with issues - Involve Communications staff early
- Positioning advice scenarios and responses
26Internal
- Privacy Act used by some to say nothing
- My view
- Be up front with staff
- Tell them what happened - general, not a how to
discussion - Reinforcing what is, an is not, acceptable
- Lessons learned
27External
- Outcome e.g. sentencing
- Focus on fixing the issues
- Stakeholders can have faith in the organisation
- Rebuilding credibility
28Dealing with fraud
- Think about it before it occurs have robust
processes in place - Deterrence
- Detection (including how you report suspicions)
- Investigation doing that quickly and
sensitively - Dealing with the aftermath
29Remember An ounce (gram) of prevention is better
than a pound (kilogram) of cure
30How fraud hurts you and your organisation
Certified Fraud Examiners and AICPA
31Questions?
32Acknowledgments
- Certified Fraud Examiners and AICPA How Fraud
hurts you and your organisation.