FRAUD EXAMINATION

CHAPTER 4
PREVENTING FRAUD

BY :

Ni Putu Gianitri Widyashanti 115020305121003

Nindya Prisanti Kartikarini
Malinda Kharista

115020307121005

115020307121014

ORGANIZATIONAL CULTURE
Three major factors in fraud prevention
relate to creating a culture of honesty,
openness, and assistance.
1.

Hire honest people

2.

Create a positive work environment

3.

Provide an employee assistance program

ELIMINATE OPPORTUNITIES FOR

FRAUD
Five ways to eliminate fraud opportunities:
1.

Have good internal controls

2.

Discourage collusion

3.

Monitor employees and provide a whistle-blowing

system

4.

Create an expectation of punishment and

5.

Conduct proactive auditing

INTERNAL CONTROLS

WHISTLE-BLOWER SYSTEM
Effective systems have the following:

Anonymity

Independence

Accessibility

Follow-up

PROACTIVE FRAUD AUDITING

Good fraud auditing involves four steps:
1.

Identify fraud risk exposures

2.

Identify the fraud symptoms of each exposure

3.

Build audit programs to proactively look for

symptoms and exposures

4.

Investigate fraud symptoms identified

PREVENTING FRAUD A SUMMARY

PREVENTING FRAUD CURRENT

MODEL
This model is characterized by four stages.

PREVENTING FRAUD SUGGESTED

MODEL

SHORT CASE 1
Karen, a friend of yours, recently started her own
business, The Bike and Boulder Company (B&B).
B&B specializes in the sales of mountain bikes
and rock climbing equipment. Karen is putting
the finishing touches on her company policies and
procedures. She knows you are taking a fraud
class and asks you to review what she has
completed thus far. You quickly notice that Karen
has neglected to address fraud and fraud
prevention in her policies and procedures. What
policies and procedures would you suggest Karen
implement to prevent and detect fraud at B&B?

ANSWER :
1. Having good internal controls,
2. Discouraging collusion between employees and customers
or vendors and clearly informing vendors and other
outside contacts of the companys policies against fraud,
3. Monitoring employees and providing a hotline (whistleblowing system) for anonymous tips,
4. Creating an expectation of punishment,
5. Conducting proactive auditing.
Each of these methods reduces either the actual or the
perceived opportunity to commit fraud, and all of them
together combine with the culture factors described earlier
to provide a comprehensive fraud prevention program.