It doesn’t matter how well you run your business, or how tight your internal controls are, it appears that for every one door that you close against crime, another two open. Crime and corruption is everywhere, not only at a micro level within private business. Let's not forget the controversy surrounding the South African 2010 World Cup and FIFA. We will probably never know the full extent of the corruption involved, but we can safely assume that most of the players, officials, fans, sponsors, etc. were interested only in enjoying a few weeks of wonderful football. That there would be a minority who would try to gain in unfair ways shouldn’t come as a surprise to any of us, but what is sad is the taste that it leaves five years after one of the greatest sporting events ever.

It's important for business owners to take every precaution to minimise the risks faced by your business.

In order to do so, you will need to, at the very least:

  1. Identify inherent fraud risks that could apply to the business. This includes consideration of all types of schemes and scenarios; incentives, pressures, and opportunities to commit crimes; and IT risks specific to the business;
  2. Assess the likelihood and significance of all these risks based on historical information, known incidents, and interviews with staff;
  3. Respond to the most likely and most significant risks by evaluating the identified risks, and performing a cost-benefit analysis of implementing controls to mitigate such risks.

     

Horror stories of corruption, fraud and other crimes in business abound. In our business as accountants, auditors and advisors many of our clients have shared stories of criminal acts that were perpetrated or attempted, either in their businesses or with their businesses as victim.

And we are not alone in this.  According to a 2014 survey conducted among small and medium practices by the International Federation of Accountants, (http://www.ifac.org/publications-resources/ifac-global-smp-survey-2014-results) 54% of respondents reported that at least one of their clients experienced some type of financial crime in 2014. These crimes vary from bribery and corruption to cybercrime, but asset misappropriation is still the most commonly reported and Africa is leading the race in this particular category of crime!

Your accountant / auditor is therefore probably (hopefully) one of the people with the most fraud-related experience you will be in contact with today! 

Besides the experience that the accountant gains from clients that are less fortunate than you, he / she also has intimate experience of your business, its staff, the challenges and the opportunities. For example, the main function of the auditor of the financial statements is to express an opinion on those financial statements, but in the process of doing so they look at all aspects of your business – including internal controls, fraud risks, business continuity, etc.

Whether you think your business is at risk or not, you should consider speaking to one of our staff or partners about performing a detailed risk assessment. The risk assessment will identify where financial crimes may occur, and who the perpetrators might be. Based on this, we can assist you to design control activities and systems to not only detect and respond to criminal activities, but more importantly to minimise the risk of these occurring.

Criminal activities, including fraud, misappropriation, etc. is intentional, and is designed to evade detection. Nobody can guarantee controls that are absolutely foolproof, but with the right partner in your corner you might just have a chance of avoiding the headlines for the wrong reasons.

Henk Heymans

Audit Partner, Partner