acfe fraud prevention check-up - BKD

• Extended investigation — Conducting a root cause analysis and performing an extended investigation mayidentify similar misconduct elsewhere in the organization.• Business process remediation — The organization may be able to re-engineer its business processes costeffectivelyto reduce or remove the opportunity for similar frauds in the future.• Internal control remediation — The organization may wish to enhance certain internal controls to reducethe risk of similar frauds going undetected in the future.The organization should consider the potential impact of its response and the message that it may send to thepublic, stakeholders, and others.MeasurementThe scale and complexity of fraud investigations often varies considerably, requiring some flexibility or customizationfor the measurements adopted. Although a variety of measures can be applied, the following may be relativelysimple and powerful measurements to track:• Issue resolution time (average number of days to resolve an issue) — This can be measured separately fordifferent categories of incident to avoid creating pressure to resolve complex cases in an unrealisticallyshort time.• Repeat incidents (number of current period incidents that are similar in nature to incidents in earlierperiods) — A low rate of repeat incidents can demonstrate effectiveness in promptly and comprehensivelyremedying business processes and internal controls in response to earlier incidents.• Value of losses recovered and future losses prevented — Fraud investigations are important for theirdeterrent effect, so their cost-effectiveness should not be judged merely by the assets they help torecover. However, pursuing asset recoveries vigorously and estimating future losses prevented can help todemonstrate the value of fraud risk management actions.CONCLUDING COMMENTSA proactive approach to managing fraud risk is one of the best steps organizations can take to mitigate exposureto fraudulent activities. Although complete elimination of all fraud risk is most likely unachievable or uneconomical,organizations can take positive and constructive steps to reduce their exposure. The combination of effective fraudrisk governance, a thorough fraud risk assessment, strong fraud prevention and detection (including specific antifraudcontrol processes), as well as coordinated and timely investigations and corrective actions, can significantlymitigate fraud risks.Although fraud is not a subject that any organization wants to deal with, the reality is most organizationsexperience fraud to some degree. The important thing to note is that dealing with fraud can be constructive, andforward-thinking, and can position an organization in a leadership role within its industry or business segment.Strong, effective, and well-run organizations exist because management takes proactive steps to anticipate issuesbefore they occur and to take action to prevent undesired results. Implementation of this guide should help establisha climate where positive and constructive steps are taken to protect employees and ensure a positive culture. Itshould be recognized that the dynamics of any organization require an ongoing reassessment of fraud exposuresand responses in light of the changing environment the organization encounters.44