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Fraud auditing a wise measure: Westall

FRAUD auditing should be more widely embraced in Australia to combat rising levels of corporate fraud says corporate fraud expert and Orna Management managing director John Westall.

Corporate fraud is estimated to cost Australian companies between $15 billion and $20 billion a year.

“Fraud auditing as a preventative measure – the dismantling of processes and management controls within an organisation – is all about reducing an organisation’s functions to their most basic level to expose areas of vulnerability,” Mr Westall said.

“Let’s take purchasing as an example. A fraud examiner would assess this department by finding out who was responsible for buying stationery, then deduce the steps occurring from the initial request to purchase right through to the purchase itself.

“The examiner would ask: “What are the authorisation processes? What are the decision making processes?

“Once areas of vulnerability are established and pointed out, the examiner can show how weak spots can be made less vulnerable by taking certain courses of action. Alternatively, they can investigate to see if the system has been abused.

Mr Westall said prevention of fraud through surveillance was a difficult managerial task.

“There is a fine balance between sufficient supervision and offending your staff by making them feel they’re not trusted,” he said.

“Company credit cards and expense accounts are especially open to abuse, and unless they are properly governed, they will continue to be abused.”

Mr Westall said Australia was well behind the rest of the world in combating corporate fraud.

“There are about three or four certified fraud examiners in WA and not more than twenty-five in the whole of Australia,” he said.

“The WA Police Fraud Squad don’t have the resources to deal with the less tangible forms of fraud such as intellectual property and have a six month backlog of cases.

“It has come back to the organisation itself to prepare for the eventuality of fraud. It’s much easier and cheaper to try and limit its occurrence than to attempt to recover losses.”

Mr Westall said a major problem that consultants analysing risk encounter was “getting people to take ownership of their solutions”.

“We constantly get requests from companies wanting us to write prevention manuals, contingency plans, disaster plans and so forth for them but it’s no good if it sits on a shelf.

“Individuals have to take responsibility for keeping their area up to date,” he said.

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