LAW & COMPLIANCE

How to Help Your Internal Audit Team Reduce Losses From Fraud

Improving internal auditors’ ability to detect fraud can lower losses that businesses worldwide suffer from corruption, asset misappropriation, and financial statement fraud.

To improve internal audit’s success in detecting fraud, a panel of internal auditors and fraud examiners at the recent Association of Certified Fraud Examiners’ 2017 global fraud conference in the US addressed the most common challenges.

“I want everybody in my group to have the basic-level knowledge and understanding, but I also look for specialists. I always try to have somebody who’s a data analysis specialist”

Panel members were:

  • Mary Breslin, founder and managing partner at Empower Audit Training and Consulting, which provides services in risk and control management in 30 countries
  • David Hildebrand, CPA, who leads Accenture’s internal audit group for financial and operational audits in the Americas
  • Jennifer Sunu, director of compliance at the US National Futures Association

The moderator of the panel, Tom McClellan, CPA, CGMA, is director of compliance assurance at GM and works closely with internal audit.

What role should internal auditors have in fraud prevention and detection in their organization? Should it be detection and research only, or interviewing and interrogating, and working with the parties?

Hildebrand: Our inside legal team typically takes the lead on any interviewing and working with the authorities. However, internal audit can provide incredible insight to the detection, root cause, and providing the necessary research to support an investigation.

We can add value to the investigation due our depth of knowledge of the control environment and technical accounting. Our legal team is responsible for working with the authorities and disciplining employees, but ultimately they rely on internal audit for financial and controls expertise.

Should the investigative skillset be invested in a core group in internal audit, or should each internal auditor have basic-level knowledge?

Sunu: We require all our auditors to have the basic-level knowledge of how fraud can be detected. We also have people with special skillsets that we feel are necessary in our industry.

We hire people who know about futures trading because that is the industry we regulate – people that have worked at various futures trading firms and understand the controls at firms and know where the bodies may be buried.

Breslin: I want everybody in my group to have the basic-level knowledge and understanding, but I also look for specialists. I always try to have somebody who’s a data analysis specialist – who is usually very knowledgeable about the IT system – and team him or her up with a subject-matter expert on the actual process itself.

I want to understand how the data and the transactional information is being created at the front end and what opportunities are there, and then I want somebody who’s a financial statement expert. Somebody who really understands the accounting and what things should look like.

I put them together, and hopefully we can unravel and figure out what’s going on.

How do you get sufficient resources for your internal audit investigative function?

Hildebrand: We leverage our existing resource pool across our global internal audit team, collaborating with our corporate investigations team in legal to ensure we retain privilege.

McClellan: We try to leverage other teams . . . We also make sure we have a very broad range of experiences on the internal audit team, including exposure to investigative functions.

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