relevance of internal audit in prevention and detection of fraud
TRANSCRIPT
RELEVANCE OF INTERNAL AUDIT IN PREVENTION AND DETECTION OF FRAUDS
LUKA ĐUKANOVIĆ, CIA
JANUARY 2017
69%
31%
The organization in which you are employee belongs to:
Private sectorPublic sector
72%
1%3%9%
16%
Internal audit is established as:
DepartmentDivisionSectorServiceUnit
160 responses in total
1%1%1%
28%
1%
14%9%
46%
Your current position:
Audit Manager Audit SeniorDeputy headHead of internal auditInternal Audit ManagerJunior internal auditorOtherSenior internal auditor
44%56%
Do you have certificate for internal audit?
YesNo
40%
60%
Do you have certificate for internal audit? - private
sector
YesNo
53%47%
Do you have certificate for internal audit? - public
sector
YesNo
64%14%
13%9%
On the current position you have been for:
1-5 years5-10 yearsLess than a yearMore than 10 years
37%
24%6%
34%
Your working experience in internal audit:
1-5 years5-10 yearsLess than a yearMore than 10 years
34%
44%
13%
6% 2%
Level of independence of internal audit in your organization you
assess as: 54321
11%
29%
317%
446%
528%
No certificate
13%
23% 3
9%
443%
543%
Yes certificate
215%
320%
445%
520%
Head of IA without certificate
38%
14%3%
45%
Management of your organization relies on internal audit reports:
CompletelyFormallyNot rely at allPartially 59%
41%
Does your organization have de-veloped anti-fraud policy?
YesNo
63%
37%
Does your organization have de-veloped anti-fraud policy? Private
sector
YesNo
49%51%
Does your organization have developed anti-fraud policy?
Public sector
YesNo
14%
13%
34%
25%
14%
Assess the level of development and implementation of anti-fraud
policy in your organization (if there is one). 1
2345(blank)
23%
47%
14%
17%
Did you have recommendations for the development and strengthening of anti-
fraud policy in your reports?No, there wasn't any recommendationYes, all recommendations are accepted and imple-mentation is ongoingYes, all recommendations are accepted and imple-mentedYes, but the majority of recommendations are not accepted
16%
9%
29%
38%
9%
Evaluate how much your recom-mendations influenced the
strengthening and development of anti-fraud policy:
12345 41%
59%
In your opinion the organization al-locates sufficient budget for the
training of internal auditors in the field of prevention and detection of
fraud?YesNo
9%
18%
1%6%
19%1%17%
18%
4% 7%
In your plans for internal audit, you assess fraud risk as a specific type of risk:
We don't consider fraud risk as specific type of risk
When preparing annual audit plan
When preparing annual audit plan, We don't consider fraud risk as specific type of risk
When preparing annual audit plan, When preparing strategic audit plan
When preparing audit engagement plan When preparing audit engagement plan, We don't consider fraud risk as specific type of risk
When preparing audit engagement plan, When preparing annual audit plan
When preparing audit engagement plan, When preparing annual audit plan, When preparing strategic audit plan
When preparing audit engagement plan, When preparing strategic audit plan
When preparing strategic audit plan
89%
11%
Are you familiar with the term "red flags"?
YesNo
83%
17%
Are you familiar with the term "red flags"? Without certificate
YesNo
96%
4%
Are you familiar with the term "red flags"? With certificate
YesNo
While you perform audit, did you encounter situations by which you can doubt that the employees in the organization had committed some kind
of fraud or other illegal activities ?No, I didn't encounter simillar situations Yes, all doubts and evidence that the fraud was
commited are part of the final reportYes, although this segment of business was not part of the audit plan I reported situation to my supervisor
Yes, although this segment of business was not part of the audit plan I reported situation to my supervisor, Yes, all doubts and evidence that the fraud was commited are part of the final report
Yes, however this segment of the business was not part of the audit plan and I did not do any-thing about it
Yes, however through further investigation we found that the doubt was not grounded, and the finding has been removed from the final report
Yes, however through further investigation we found that the doubt was not grounded, and the finding has been removed from the final report, Yes, all doubts and evidence that the fraud was commited are part of the final report
Yes, however this segment of the business was not part of the audit plan and I did not do any-thing about it, Yes, although this segment of business was not part of the audit plan I re-ported situation to my supervisor
Yes, the issue was resolved in silence, but I removed this finding from report at discretion of my superior
Yes, although this segment of business was not part of the audit plan I reported situation to my supervisor, Yes, however through further inves-tigation we found that the doubt was not grounded, and the finding has been removed from the final report
Yes, although this segment of business was not part of the audit plan I reported situation to my supervisor, Yes, however through further inves-tigation we found that the doubt was not grounded, and the finding has been removed from the final report, Yes, a
Yes, although this segment of business was not part of the audit plan I reported situation to my supervisor, Yes, the issue was resolved in si-lence, but I removed this finding from report at discretion of my superior
Yes, although this segment of business was not part of the audit plan I reported situation to my supervisor, Yes, the issue was resolved in si-lence, but I removed this finding from report at its sole discretion
Yes, the issue was resolved in silence, but I re-moved this finding from report at its sole discre-tion, Yes, all doubts and evidence that the fraud was commited are part of the final report
Yes, although this segment of business was not part of the audit plan I reported situation to my supervisor, Yes, the issue was resolved in si-lence, but I removed this finding from report at its sole discretion, Yes, however through further investigation w
Yes, although this segment of business was not part of the audit plan I reported situation to my supervisor, Yes, the issue was resolved in si-lence, but I removed this finding from report at its sole discretion, Yes, the issue was resolved in silence, but
Yes, however this segment of the business was not part of the audit plan and I did not do any-thing about it, Yes, all doubts and evidence that the fraud was commited are part of the final report
Yes, however this segment of the business was not part of the audit plan and I did not do any-thing about it, Yes, although this segment of business was not part of the audit plan I re-ported situation to my supervisor, Yes, the issue was resolved in silence
Yes, however this segment of the business was not part of the audit plan and I did not do any-thing about it, Yes, the issue was resolved in si-lence, but I removed this finding from report at discretion of my superior, Yes, all doubts and ev-idence that the
Yes, the issue was resolved in silence, but I removed this finding from report at discretion of our Chairman of the Board
Yes, the issue was resolved in silence, but I re-moved this finding from report at its sole discre-tion
I donn't know ??? Evidence seen but was subsequently replaced by client. Though reported to Head, there was no evidence to support claim
Yes, the issue was resolved in silence, but I re-moved this finding from report at its sole discre-tion, Yes, however through further investigation we found that the doubt was not grounded, and the finding has been removed from the final re-port
Yes, the issue was resolved in silence, but I re-moved this finding from report at its sole discre-tion, Yes, however through further investigation we found that the doubt was not grounded, and the finding has been removed from the final re-port, Yes, all dou
0
5
10
15
20
2521 22
20
79
7 7
1
13
69
5
1 2 13
Private sectorPublic sector
30%
41%
29%
Number of initiated criminal and disciplinary proceedings for de-tected fraud in the organization (for the period when you are an employee of the organization):0
1-3More than 3
39%
47%
14%
Number of initiated criminal and disciplinary proceedings for de-tected fraud in the organization (for the period when you are an employee of the organization):
public sector01-3More than 3
60%
40%
Have you ever got a tip where it is suspected that one of the employ-
ees in organization committed fraud or other illegal activity?
YesNo
40%
34%
26%
Number of initiated criminal and disciplinary proceedings for de-
tected fraud in the organization as a result of work of internal audit:
01-3More than 3
53%33%
14%
Number of initiated criminal and disciplinary proceedings for de-
tected fraud in the organization as a result of work of internal audit -
public sector:
01-3More than 3
29%
38%
33%
Number of frauds detected by performing internal audit:
01-3More than 3
Private sector Public sector0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
Number of frauds detected by per-forming internal audit:
0 1-3 More than 3
1 2 3 4 50.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
Number of frauds detected by performing internal audit in relation to the level of independence of IA
0 1-3 More than 3
66.67%
30.00%
14.29%
23.94%
38.18%33.33%
40.00%
47.62%
38.03%34.55%
30.00%
38.10% 38.03%
27.27%
0 1-3 More than 30.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
Number of frauds detected by performing internal audit in relation to the Number of initiated criminal and disciplinary proceedings for detected fraud
in the organization:
0 1-3 More than 3
CONCLUSIONS• Stronger management commitment in developing and implementation of
anti – fraud policy
• Higher budget for trainings and certification of IA related to the anti – fraud
issues
• IA assessment of governance of fraud risk management and tone of the
top
• Employees commitment to the ethical codex
• More recommendation for developing adequate anti fraud policy and
improvements of internal controls where the level of risk of fraud is
highest.