This article is taken from our quarterly overview of Canadian news, a newsletter published by the Canadian member firms of
Moore North America
. It is part of our mission to be the partner of choice for your success by keeping you informed of the latest news..
Fraud: prevention is better than cure
No company, whatever its size or sector, is immune to fraud, whether perpetrated by an external or internal individual. The most common fraud schemes include bribery, asset misappropriation and financial statement fraud. In addition, with the advent of new technologies and the emergence of cybercrime, the need for fraud prevention and detection mechanisms is becoming ever more obvious, and indeed essential, in the face of this growing threat.
The different costs of fraud
In Canada in 2018, the compilation of financial losses from fraud averaged $200,000. It should be noted that this average may be underestimated, particularly since many frauds go undetected by companies, or are not reported in surveys.
So without effective fraud prevention and detection mechanisms in place, organizations expose themselves to serious consequences. What’s more, the costs emanating from a fraudulent act go beyond the financial, and can affect employee morale, corporate reputation, commercial relations and even share prices. In other words, the cost of implementing a fraud prevention and detection system is often lower than the cost of failing to do so. It is therefore imperative that fraud prevention and detection mechanisms are put in place within organizations, as these procedures enable faster detection and, consequently, lower losses.
Fraud detection methods
There are a number of fraud prevention and detection mechanisms, including corporate prevention and control systems, corporate culture and detection methods outside the company’s influence. Prevention and control systems are considered to be the most effective means of detection, with an effectiveness rate of almost 50%.
On the other hand, in 2018 , the main factors contributing to the perpetration of fraud were as follows :
Selon les cas recensés par l’étude présentée au document Report of the Nations – 2018 Global Study on occupational fraud and abuse, Association of Certified Fraud Examiners (ci-après « Association des CFE »). Statistique Canada, Les fraudes contre les entreprises au Canada : résultats d’une enquête nationale, par Andrea Taylor-Butts et Samuel Perreault, 2007-2008. L’étude de 2018 de l’Association des CFE.
The role of the forensic accountant
Various standardized models are used on the market to guide the implementation of a fraud prevention and detection system. However, a consultation with a forensic accountant familiar with the particularities of your industry and the risks associated with it can guide you in implementing an effective system. Forensic accountants know the tricks used by fraudsters, so they can not only expose them, but also prevent them, by customizing the necessary internal control mechanisms.
Adding fraud prevention and detection activities to your governance procedures is a responsible, sound and, above all, profitable practice!
To find out more about implementing a fraud prevention and detection system, write to us!
