It is generally believed that fraudsters commit their acts because they do not think that they will be caught. Adding new rules or encouraging whistle-blowers will not, in my opinion, cause fraudsters to change their ways.
While whistle-blower programs, fraud hotlines and other ways for employees to alert their organizations to fraudulent activity are important and necessary elements to safeguarding an organization from fraud, they aren’t in themselves sufficient. This is borne out by the statistic that fraudulent activities last a median of 18 months before discovery!1 Surely we can do better.
So the questions to ask are: How can one detect fraud sooner, rather than later? How can an organization proactively detect fraud as opposed to waiting for some Good Samaritan to blow the whistle?
One answer is to put detective measures in place and let everyone know that they are running 24/7. This can help create an environment where the risk of getting caught outweighs the possible gain of committing fraud. By detective measures, I am referring to leveraging audit analytics technology to seek out indicators of fraud in an organization’s data. When these measures are applied either on a periodic or a continuous basis (continuous auditing or monitoring) and everyone is aware of their existence, detective measures become preventative in nature.
Applying audit analytics to fraud detection can be done in incremental phases. It doesn’t mean doing nothing one day and implementing a full suite of fraud detection tests the next day. Experience has shown that successful organizations that are leveraging audit analytics technology to the fullest are the ones that have established a good solid foundation in people, processes and technology.
Competency in understanding key business processes and being able to analyze and interpret the data that reflects those activities is a requirement. Likewise, organizations need to develop increasing levels of sophistication in using audit analytics if they are to implement a technology-enabled fraud detection and prevention program.
We all can do a better job of detecting fraud sooner rather than later. Audit departments can play a key role in making all that happen by leveraging their skills, approaches and technologies to catch fraudsters sooner—and challenge their belief that they won’t get caught.
(Source: ISACA Journal Author Blog – Peter Millar)