“Every minute, someone is thinking about how to steal without being caught”, Summit Consulting experts tell ICPAU members on fraud

As we gear up to the fraud awareness week, which will commence from 13th to 19th November 2022, Summit Consulting Ltd is creating awareness on fraud risk management. Speaking at the Institute of Certified Public Accountants of Uganda monthly event, a fraud expert at summitcl.com asked: ‘’How much do you estimate your organization loses to fraud annually?

According to the ACFE Report to the Nations 2022, organizations lose an estimated 5% of their revenue to fraud. How much does that translate for your organization? The median and average loss per case globally are estimated at US$117,000 and US$1,783,000 respectively. This translates into Ugx444,600,000 and Ugx6,775,400,000.

Figure 1: ACFE Report to the Nations 2022 estimates that organizations lose 5% of revenue to fraud each year

The Uganda Police Report 2021 shows that a total of 10,966 cases were a result of economic fraud. About Ugx11billion was lost due to fraud cases. This is not small money considering the revenues of private sector organizations and the tough economic times.

Organizations are losing a lot of money.

They are bleeding. Everyone is asking where are the auditors to stop the bleeding and by providing assurance on the integrity of controls to protect stakeholder value. As auditors, you are in the right place to discuss fraud management in organizations. Fraud is part of organizational operations and represents the biggest risk since real value is lost.

Fraud is volatile. It is like a moving target. Every single hour, someone is thinking about how can they enrich themselves at the expense of the company. Research shows that financial statement fraud is the leading fraud scheme globally. This includes documents related to various transactions from inception to disposition. Corruption comes in at the second spot.

Coming back to your organizations, which areas are prone to fraud? ‘’Fraud is common in procurement,’’ replied Emmanuel Okwang. As auditors, how do we put more emphasis to close revenue leakage points?

 

Figure 2: Financial statement fraud remains the top prone fraud area in organizations, ACFE Report to the Nations 2022

Around 2013, we got a matter for investigation at Summit Consulting. The board through a whistleblower learnt about the gross mismanagement of the organization’s projects. Beneficiaries were not receiving their benefits. This was an NGO supporting vulnerable people in refugee camps. Payments were supposed to be made to the beneficiaries to support them. Everything seemed to be okay until a whistleblower made a tip that came to the notice of the board. The board wanted to know the extent of the problem.

How we solved the puzzle

We reported the matter to the Police and obtained a police reference number. The assumption is that all investigations could end up in the courts of law. Also, we have various laws like the Data Protection and Privacy Act. You need to understand your limits as an organization. For this particular, we set up an anonymous whistleblowing system to get information and collected as much evidence on the case. In CFE training, we have covert and overt investigation techniques. Since we had the whistleblowing system set up and the case registered with the police, it was very to collect evidence. At the same time, bringing different experts. We were able to fix the board’s issue.

Some organizations prefer to handle matters internally. They are matters by nature that will involve external stakeholders. At some point, you will have to obtain call data records. You must have court orders and search warrants to do any searches at the suspect’s offices or place of residence. On your own as an auditor, you do not have such powers to cease documents and electronic evidence. As auditors, you must change your game accordingly. Visit https://www.ug.julisha.org/ to try out the whistleblowing system. It can be customized to your organization.

The full presentation can be downloaded here: ICPAU-Fraud-Risk-Management.pdf (0 downloads)

Copyright Mustapha B Mugisa, Mr Strategy 2022. All rights reserved.

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