FRAUD DETECTION, INVESTIGATION AND PREVENTION ...

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Inconsistent, vague, or implausible responses from management oremployees arising from inquiries or analytical procedures especiallywhen being analyzed by a third party. Unusual discrepancies between the entity’s records andconfirmation replies. Unexplained or inadequately explained differences between themember personal accounts on either savings or loan portifolio andthe general ledger balances. There can also be differences in thesubsidiary ledgers and general ledger of the other accounts in eitherassets or liabilities. Missing or non-existent cancelled checks in circumstances wherecancelled checks are ordinarily returned to the entity with the bankstatement. Missing inventory or physical assets of significant magnitude. High asset depreciation rates combined with unclear disposalpolicies of any assets that have been fully depreciated. Unavailable or missing electronic evidence, inconsistent with theentity’s record retention practices or policies. Fewer responses to confirmations than anticipated or a greaternumber of responses than anticipated. Inability to produce evidence of key systems development andprogram change testing and implementation activities for currentyearsystem changes and deployments.When the investigation to detect fraud is being conducted by a thirdparty, there usually arises some mis-understandings or lack of cooperationfrom the management in the case there is fraud. These include: Denial of access to records, facilities, certain employees, suppliers,or others from whom evidence might be sought. Undue time pressures imposed by management to resolve complexor contentious issues. Complaints by management about the conduct of the audit ormanagement intimidation of engagement team members,particularly in connection with the auditor’s critical assessment ofaudit evidence or in the resolution of potential disagreements withmanagement. Unusual delays by the entity in providing requested information.
Unwillingness to facilitate auditor access to key electronic files fortesting through the use of computer-assisted audit techniques. Denial of access to key IT operations staff and facilities, includingsecurity, operations, and systems development personnel. An unwillingness to add or revise disclosures in the financialstatements to make them more complete and understandable. An unwillingness to address identified weaknesses in internalcontrol on a timely basis. Unwillingness by management to permit the auditor to meetprivately with those charged with governance. Accounting policies that appear to be at variance with industrynorms. Frequent changes in accounting estimates that do not appear toresult from changes circumstances. Tolerance of violations of the entity’s code of conduct.Fraud preventionThe responsibility for preventing fraud and error rests with the SACCOBoard of Directors. This can be done by developing adequate policies toprotect the assets of the SACCO as well as employ qualified staff who areable to handle in a professional manner the day to day operations.To prevent fraud, the management needs to know which areas can beutilized to perpetrate the vice. There is need for proper, clear definition ofpolicies and procedures so that activities can be traced and any red flag canbe detected in good time.The following sections need address;CASH <strong>AND</strong> CASH EQUIVALENTSCash and cash equivalents are a combination of cash at hand and cash atbank.Cash at HandThis represents cash at vault and petty cash.Petty Cash
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FRAUD DETECTION, INVESTIGATION AND PREVENTION ...

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