Understanding Fraudsters as a Stimulus for Internal Audit

Each year, the ECIIA Conference is arranged in different European countries. IIA Switzerland has been selected to host the Conference of the ECIIA (European Confederation of Institutes of Internal Auditing) in 2017.

The mission of the ECIIA is “Furthering the development of Internal Audit and its role in promoting good governance at the European level”. Our members include the National Institutes of Internal Audit in the countries of the European regions. Our responsibility is to help, develop, share and promote best practices in the private and public sectors.

SPEECH INTRO:

Thank you for joining me here this afternoon and welcome to my speech with the provocative headline “Understanding fraudsters as a Stimulus for Internal Audit”. My name is Alexander Schuchter.

Is it really possible to understand criminals? How can such understanding help the company and the internal audit, for example, in assessing controls and determining audit steps? Who is the typical fraudster and what we can stimulate? Is there anything beyond our recent theories and models, such as the Fraud Triangle?

Perhaps the most important question we need to ask ourselves is: Why should we be interested in this?

According to the Red Book (IPPFs), Internal Auditors must have sufficient knowledge to evaluate the risk of fraud and the manner in which it is managed by the organization, but are not expected to have the expertise of a person whose primary responsibility is detecting and investigating fraud. Nonetheless, the internal audit activity must evaluate the potential for the occurrence of fraud and how the organization manages fraud risk.

With increasing frequency, CEOs and managers find themselves being held personally liable in the event of fraud. Moreover and according to the ACFE, companies lose 5 % of their annual turnover to occupational crimes. The key to progress in this field lies in learning to understand the modus operandi taken by the fraudsters.

I would like to name a few more reasons - why we should be interested in this:
- missing property and assets,
- costs for examinations and investigations,
- costs for revision and improvement of the system,
- penalties, convictions, lawsuits,
- increased capital costs… Are you convinced yet? No?

Maybe a few more reasons:
- dismissal, immediate recall,
- losing the trust of close friends and family,
- tarnished professional reputation,
- penalty payments, interrupted career, imprisonment,
- loss of customer trust, damaged relationship with the authorities,
- lower morale amongst employees,
- recruiting problems,
- loss of innovation,
- impaired ability to compete on the market, drop in share price...

So maybe I’ve managed to convince you at last. If we really want to, we can protect and even increase our profits, limit our liability and yes, we can strengthen our professional as well as our corporate reputation.