UK: Fraud Is On The Board Agenda, But Companies Know They Must Do More

Last Updated: 14 November 2012
Article by James Meadowcroft

An increase in the vulnerability to fraud, but not necessarily an increase in the use of analytics and fraud risk assessments – some of the key highlights from the 2012 Deloitte Internal Audit Fraud Survey 

At a time of rising losses to fraud, it is not therefore surprising that 43% of respondents to the 2012 Deloitte Internal Audit Fraud Survey said that their organisation's vulnerability to fraud had increased over the past 12 months.  However, whilst there has been a broadly positive response to counter the increasing threat from fraud, a number of important gaps remain.

Given the current economic and wider business environment, the risks faced in relation to fraud are often dynamic and therefore it is important that the risk landscape for an organisation is regularly considered.  It is therefore encouraging that 49% of Internal Audit teams stated that they are performing regular fraud risk assessments. 

However, a significant proportion of respondents (40%) stated that they are not.  The absence of such an assessment makes it difficult for Internal Audit functions to determine how to effectively focus key resources to the areas of highest fraud risk.

The use of data analytics by Internal Audit teams is becoming increasingly common.  Indeed, 55% of respondents have used data analytics to prevent, detect and investigate fraud.  However, 40% stated that they do not use them.  Additionally, 38% also said that they were not adequately resourced to perform such data analysis, and 32% had received no, or only ad hoc training, on the use of analytical tools and techniques.

The analysis of large volumes of data critically enhances the ability, for example, to detect fraudulent transactions or behaviours and allows patterns of activity to be established.  All of which are important in minimising the losses from frauds by firstly enabling the earlier detection of suspicious activities and secondly acting as a deterrent to future fraudulent behaviour.

The results of the survey provide encouragement that organisations are focussing more on fraud risk and their associated controls.  However, the results indicate that whilst there appears to have been an increase in fraud resources, a training and capability skills gap still remains.

It is therefore not surprising that organisations are increasingly turning to third parties to assist, especially during investigations.  Interestingly, 38% said that in order to provide greater assurance over the fraud risks within the organisation, the provision of fraud awareness training to all staff would also be of particular help.  Of course having a workforce and management team that has been educated in relation to fraud and the associated penalties provides a variety of benefits.

It is not just an increase in the likelihood of potential fraud cases being reported, but such training also acts as a powerful deterrent to individuals who might be considering committing such an offence in the first place.

The 2012 Deloitte Internal Audit Fraud Survey provides a number of powerful insights from Heads of Internal Audit from across the public, private and not-for-profit sectors on key areas for improvement in order to minimise the losses from fraud across all organisations. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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