Guide to Preventing Workplace Fraud - Chubb Group of Insurance ...

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General fraud detection practices. Fraud detection can be practiced within various areas of a company and often may be part of the role of the internal audit or investigative unit. Some fraud-detection practices that businesses should consider include: ■ Variance analysis, performed to evaluate variances from budget or other expectations. ■ Data mining of financial transaction information to identify patterns and trends. ■ Analysis of data correlations to identify anomalies in the expected relationship between related or dependant financial report account balances or other data. ■ Computerized tracking and analysis of employee expense accounts performed on an ongoing basis in order to detect and respond to anomalies (such as an employee with abnormally high travel expense patterns). ■ Review of supporting documentation to identify instances where that documentation is inadequate or suspect. ■ “Fraud audits” specifically targeting possible fraud in specified processes or business units. 16
Vendor management. A company can protect itself from vendor fraud by using an effective vendor screening program. 2 Such a program can: ■ Verify that a vendor actually exists and that the identification data provided by the vendor (address, for example) is accurate. ■ Verify a vendor’s ownership and the identity of key management personnel (and screen for potential conflict-of-interest concerns). ■ Determine if a vendor, its owners and affiliates, or its key management personnel have a history of criminal activity. ■ Determine if a vendor, its owners and affiliates, and its key management personnel have an acceptable business reputation. ■ Verify that a vendor has the requisite qualifications, licenses, certifications, permits, and insurance coverage. A company may also wish to include the following in its vendor fraud program: ■ Procedures for approving orders, authorizing payments, issuing checks, and reviewing vendor payments, bearing in mind appropriate segregation of employee duties. ■ Prepayment review of vendor invoices, including reconciliation with company orders and authorizations, receiving reports, returns, and adjustment records. ■ Internal audit of the accounts payable function. 2 Always obtain competent legal advice before implementing vendor screening programs. For example, screening programs that include credit history checks must be properly administered in order to maintain compliance with applicable laws. 17
Page 1 and 2: Guide to Preventing Workplace Fraud
Page 3: GUIDE TO PREVENTING WORKPLACE FRAUD
Page 7: CONTENTS Introduction .............
Page 10 and 11: focus on prevention, detection, and
Page 12 and 13: The Fraud Triangle What motivates p
Page 14 and 15: ■ Minimization: “I’m not taki
Page 16 and 17: Cash-diversion schemes range from s
Page 18 and 19: FRAUD RISK MANAGEMENT- LOSS CONTROL
Page 22 and 23: ■ “Vendor audits,” which typi
Page 24 and 25: company. Checks with identified inc
Page 26 and 27: ■ Investigate Forms W-2 and 1099,
Page 28 and 29: Segregation of duties may be diffic
Page 30 and 31: In many companies, vendor payments
Page 32 and 33: ■ “Vendor audits,” which typi
Page 34 and 35: The above scenario presents a numbe
Page 36 and 37: part of computerized records and ar
Page 38 and 39: software, and color laser printers
Page 40 and 41: Misappropriation of Waste, Scrap, a
Page 42 and 43: Expense Account Reimbursement Fraud
Page 44 and 45: Payroll fraud may involve collusion
Page 46 and 47: ■ Employee correspondence sent to
Page 48 and 49: ■ Design and implement safeguards
Page 50 and 51: ■ Foster a strong “perception o
Page 52 and 53: Many companies require that employe
Page 54 and 55: ■ Callers are asked to call back
Page 56 and 57: ABOUT THIS BOOKLET This booklet was
Page 60: Chubb Group of Insurance Companies

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