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Pro Ethics Fraud Risk Management Advisory Services

SERVICE PROFILE

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Pro Ethics Fluent in Fraud Risk Management...

The Risk of Fraud in your Organization All organizations, big, medium, or small; private for-profit, public sector/ governmental, or not-for profit/NGO are subject to fraud risks especially in a socio-economic environment like we have in Nigeria. Today’s economic pressures have significantly increased the incentives for unethical and fraudulent behaviour. What fraud is. Fraud covers a wide range of irregularities and illegal acts or omission characterized by intentional deception or misrepresentation, and concealment. The goal is to deliberately and dishonestly obtain a benefit and/or cause some other party a loss. It includes acts of corruption where entrusted authority is abused for unauthorized benefit. Fraud can be perpetrated on an entity, by the entity, and on behalf of an entity.

Why is fraud to be prevented? Fraud can hit organizations where it really hurts. As we have seen globally, frauds have led to the downfall of entire organizations like Enron. For the relatively small organizations, valuable and scarce resources are continuously stolen; for the medium to the very large organizations, in addition to the loss of financial resources, a downturn in staff morale, productivity, and attendant effects on operations, significant organizational brand damage results with often devastating consequences as public or stakeholder confidence and trust in the organization is seriously eroded.

Fraud is like toxic waste Interesting fraud-related findings 

At the same time, the integrity and performance of members of the Management and the Board is seriously questioned and often tarnished especially if key executives are found to be involved in fraud, or if significant fraud has been going on for a long time without detection and action.

Who is watching how you manage your fraud risks? The chances of fraud being successfully perpetrated and undiscovered is an ever present risk that organizations, big or small, must manage effectively. Shareholders, business owners, donors, investors, lenders and creditors, regulators, and other stakeholders are becoming increasingly demanding and requiring heightened assurance that the organization or business is properly governed, and adequately protected from fraud by proactively preventing, promptly detecting, and continuously deterring its occurrence.

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The general public is also watching and once it comes to light that you have been careless in combating fraud, your reputation and brand will likely suffer a lasting hit.

Research has shown that “about 25% of employees are totally honest, 25% are totally dishonest, and the remaining 50% are swayed by opportunity, and the chances of the fraud being detected”. The Association of Certified Fraud Examiners in a recent study found that “The average recovery in discovered fraud cases was only 20%. Thirty-seven percent of the cases recovered nothing. Given that the cost to investigate these cases can be very expensive and time consuming and the efforts to recover the losses often prove futile, the statistics indicate that the most cost-effective way to deal with fraud is to prevent it from occurring in the first place”. Through lack of knowledge and inept practices, many organizations unwittingly create the environment that allows fraud to thrive. Organizations do not adequately address the risk of management override of internal controls.

“Fraud and deceit abound in these days, more than in former times” - Sir Edward Coke, Lord Chief Justice, England, 1602.

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Pro Ethics Fluent in Fraud Risk Management...

More about fraud..... What kind of fraud are we talking about?

Who commits fraud?

Actually, ANYONE connected with the organization who has the motivation to, is able to rationalize or justify the act to him/herself, and/or sees an opportunity to do so with low chances of being publically exposed.

Fraudulent (financial) reporting or intentional falsification/manipulation of accounts or reports either to create a picture that does not really exist so as to deceive in order to receive a benefit or avoid a sanction; or to conceal a fraudulent act. Usually committed by those in some position of authority.

When the above factors align; ANYONE, including vendors and customers, will be highly likely to commit fraud.

Asset misappropriation where organizational resources like cash or cash equivalents, inventory, equipment, property, etc are stolen or diverted.

Who has a duty to prevent, detect, and control fraud? All staff and organizational partners have a duty! However, the Board and Executive Management of the organization or the owners of smaller businesses have the ultimate responsibility to ensure that the organization is arranged in such a manner that it’s fraud risks are adequately managed and controlled.

Corrupt acts where authority is illegally used to obtain unauthorized benefits such as receiving kickbacks from vendors or contractors for manipulating jobs and contracts in their favour; using corporate funds to confer benefits on favoured persons; using organizational assets and property for illegal private benefit such as unauthorized hotel stay on the organization’s account etc.

They need to ensure that proper anti-fraud strategies are designed, implemented, and actually work effectively in practice. They can delegate the responsibilities, but ultimate accountability for the success or failure of fraud prevention and control systems lies squarely on them! Recall, fraud can significantly limit the potential of organizations by creating perverse leadership, damaging reputations and brands, disrupting operations, causing financial losses, and lowering productivity by negatively affecting staff morale.

Could this be happening here?                     

Fictitious revenue fraud Improper IFRS conversion fraud Premature revenue recognition schemes Improper asset valuation schemes Concealed liabilities and expenses schemes Masked disclosure schemes Write-offs and False debit entry schemes Understated sales schemes Cash/funds/income theft and diversion fraud Inventory padding, and stock shrinkage schemes Fictitious expenses schemes Suspense account fraud schemes Procurement and other fraudulent disbursement schemes Payroll fraud schemes Fictitious payee schemes Influence peddling and abuse of office schemes Favourable treatment schemes Contract rigging and over invoicing schemes Fraudulent IT system modification schemes Confidential information and identity theft schemes. Etc.

Managing the risk of fraud proactively Only by thorough and a constantly high intensity effort by a strong leadership can an organization properly and continuously protect itself against fraud. The development and implementation of a best practice fraud risk management framework can assist organizations to proactively combat and prevent fraud, as well as communicating that fraud will not be tolerated at any level, and will be aggressively combated. A robust fraud risk management program having the right balance of key components (see below) will enable an organization create an environment which is strongly resistant to fraud and other improper conduct on a constant basis.

The thing about Internal Controls Organizations often feel they have adequate controls in place to fight fraud; but what they actually have is a patchwork of financial and administrative controls developed and implemented over time. Many have often been put together without a proactive and formal risk assessment to identify the nature and significance of fraud risks the organization is exposed to, and what controls are actually required to efficiently mitigate these risks. They therefore do not have the right balance of controls in place. Over time, new fraud risks emerge as a result of major environmental and organizational changes, new technology, and changes in staff and management; but internal controls remain unchanged and therefore become eventually ineffective in addressing these new fraud risks. Whilst all fraud controls are internal controls, not all internal controls are fraud facing controls!

Components of an effective Fraud risk management framework

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Pro Ethics Fluent in Fraud Risk Management...

Helping you control your fraud risk.... Proethics offers a leading class Fraud Risk Management Advisory Service to assist organizations evaluate their current anti-fraud systems and arrangements, and improve their effectiveness by implementing effective fraud risk control strategies that will significantly enhance the prevention, detection, and deterrence of fraud; as well as providing reasonable assurance to the organization’s stakeholders that it is responsibly and proactively managing it’s fraud and corruption risks in a manner that will enable the organization safeguard, and maximize the benefit from the use of it’s resources in order to secure the highest levels of attainment of its objectives for being in existence. Our services include:

Fraud Risk Management Program Evaluation: We evaluate an organization's existing fraud risk management systems and arrangements against the framework of authoritative guidance and best practices. This provides management with a robust and actionable roadmap to help strengthen its fraud risk governance, assessment, mitigation, and monitoring activities in line with leading practices.

Fraud Risk Assessment: We assist management in the identification and ranking of specific fraud schemes and scenarios that create fraud risks for the organization, including the where, how, who, why, and when fraud might occur, so that targeted, efficient and effective control action plans can be developed and implemented to counter the fraud risks. Our risk assessment process explicitly identifies fraud schemes specific to your industry. It also considers IT fraud risks, evaluates existing internal controls, and produces a fraud risk register to assist the organization control and continuously monitor it’s fraud risks.

Design of Fraud Control and Response Plan: We assist organizations develop an international best practice comprehensive fraud control and response plan that documents, customizes, and addresses all aspects of their fraud risk management systems. This plan is an essential resource in fighting fraud as it sets out all anti-fraud policies, the protocols for actions to be taken to prevent, deter, report allegations, investigate, and remediate fraud, in one concise place. It also communicates responsibilities for fraud control activities within the organization, and sets out a framework for the evaluation and continuous monitoring of the fraud risk management system. An organization’s fraud control and response plans also clearly:

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Informs, guides, and places expectations on staff and other business partners regarding the organization’s fraud control arrangements and outlines their responsibilities to prevent, detect, and report fraud. Articulates and communicates it’s unflinching commitment to the prevention, detection, and prosecution of fraud.

In addition to developing the resource, we also advise on how to embed them in your daily operations.

Anti-Fraud Program Audit: We plan and perform procedures to confirm that the organization's fraud prevention, deterrence and detection systems are consistent with executive Management and the Boards’ expectations and that employees and other organizational partners comply with associated policies and procedures. We also report potential problems and recommend solutions to enhance an organization’s anti-fraud program and controls.

Internal Audit anti-fraud capabilities assessment: We assess the structure and operations of your Internal Audit department against various professional practice guidance pertaining to fraud and the internal auditor’s role and effectiveness in detecting, preventing, and monitoring fraud risks, and addressing those risks in audits and investigations. We will make recommendations as is necessary to address any deficiencies in the arrangements and work methodology of your internal audit unit that limits its ability to effectively and efficiently assist the organisation combat fraud.

Development of Fraud Detection plans and programs: We assist organizations design customized fraud detection audit programs and data analysis routines that they can utilise to proactively search for possible indicators of fraud in their business processes and operations, thereby enhancing their ability to uncover fraud in a more timely manner and also to deter fraudulent behaviour. Where appropriate, we can computerize the detection routines through the use of Computer Assisted Audit Tools (CAATs).

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Pro Ethics Fluent in Fraud Risk Management...

services continued........

Fraud Awareness Training: Lack of knowledge and awareness about fraud is one key reason why organizations are not as effective as they should be in combating fraud. Staff often do not know that they have anti-fraud responsibilities, and no one tells them, nor trains them! We will undertake a training needs analysis across your organization and design customized fraud risk awareness and prevention training programs to educate, empower, and equip your people with specific guidance and knowledge to be a valuable asset in preventing, detecting, and controlling fraud. Training can be tailored for your Board/Trustees; Audit Committee; executive Management; role-specific staff, staff induction; and continuous staff development. Such training also deters and serves to constantly communicate the strong resolve of the organization to fight fraud. We can also develop appropriate fraud awareness communications for your vendor and customer interactions to underlie the seriousness the organization attaches to fraud control.

Fraud and corruption risk surveys: We can also carry out independent and confidential fraud management related surveys to enable organizations gain an understanding of the status or progress of their fraud risk management efforts, or receive an insight into areas of their anti-fraud strategies that may require modification. Surveys that can be conducted include surveys to gauge the staff perception of the organization’s control environment, or surveys to gauge staff or vendor understanding of the fraud control policy, or senior management understanding of the policy on conflict of interest etc. A group of entities within the same industry group can commission a survey to better understand their industry antifraud practices, attitudes, and behaviour.

Who can use our services? In addition to profit oriented private companies, other entities who will benefit tremendously from our range of services include:

Government MDA’s & other Public sector institutions - Fraud and corruption is a huge problem in the conduct of, and delivery of government activities and programs respectively. Fraud undermines the success of government initiatives and ensures developmental efforts never deliver as planned. Government loses the trust of the people when it’s systems are riddled with fraud and corruption. The principal issue is often the lack of determined leadership to make positive changes. Our range of services can help earnest government MDA’s who wish to manage their fraud risks in the interests of the people to develop an effective and vibrant anti-fraud framework for their institutions. We can also assist to build tailored anti-fraud mechanisms for various governmental intervention programs, emergency efforts, and poverty alleviation schemes in order to assure that the objectives of the programs are not significantly threatened by the risk of fraud and corruption.

NGO’s & Not-for-profits (NFPs) - Program objectives, (donor) funding sources, and reputations are severely at risk where fraud is rife in an NGO system. Similar to the public sector, many NGO’s and NFPs do not fully deliver program outcomes because of fraud. Fraud risks are present in donor institutions (where the efficient and proper use of aid money is becoming increasingly crucial), as well as in the organizations and systems set up to drive, deliver, and monitor the program. Our services will be especially useful in NGO/government partnerships, which are known to have a high fraud risk profile. We can tailor our services to individual programs, and also report on the adequacy of the design and operation of fraud risk management processes in individual programs.

FRAUD RISK MANAGEMENT FOR SMALLER BUSINESSES Small businesses are not immune to fraud risks just because they are small. A lot of small organizations and their owners lose invested funds, sales revenues, assets, and hard earned resources due to continuous and undetected fraudulent behaviour by corrupt staff and business partners, either working alone or in collusion. Small organizations have the added risk factor that certain controls like effective segregation of duties, employee background checks, proper monitoring of personnel etc may not be very feasible due to size constraints, and this increases their exposure to fraudulent staff who are on the constant lookout for opportunities to defraud the business. Proethics offers a purpose-built package constructed from our range of fraud risk management services custom developed for smaller businesses who wish to proactively create a fraud resilient environment for their businesses. Smaller businesses can now upgrade their fraud defences and implement personalized versions of the anti-fraud systems that very large organizations use to combat fraud effectively, but at a fraction of the budget. For our small business package, we will typically work with businesses and organizations that have 8 or more, but not exceeding 20 employees.

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Pro Ethics Fluent in Fraud Risk Management...

Choose how to use our services.... You can decide to select a combination of our services as dictated by your needs. We also offer our services on an organizationwide level or target them at specific high risk operations, processes, functions, departments, or business locations that you choose. This flexibility will allow you to implement our services at a pace that suits your organization. We are also able to advise your organization specifically on fraud risk management during:

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Significant organizational change programs Introduction of major new corporate systems and plans Joint Ventures (personal or corporate) Mergers & Acquisitions and related due diligence work Delivery of major projects or contracts Implementation of new government programs or initiatives

Benefits of being proactive.... Most organizations find it uncomfortable to discuss the issue of fraud even though all organizations experience it to varying levels and despite the damaging effects it can have. The essence of being proactive about managing your organization’s fraud risks is that this approach enables you to anticipate issues rather than being reactive, helps you to avoid unpleasant surprises and position yourself as an organization that is constructive, well-run, with capable and strong leadership, able to analyse and take action to manage the major risks that face it. Increased demand from organizational stakeholders and the public for proper accountability and stewardship over use of resources from those entrusted with the leadership and governance of organizations has meant that no entity can afford to be negligent with the management of it’s fraud risks. Such carelessness will surely have serious repercussions at some point. It is imperative organizations act quickly to set up strong fraud defences, and periodically sweep the organization to ensure it’s fraud defences are still robust and effectively preventing, detecting, and deterring fraud, especially as the business environment changes. Proethics can help your organization, big or small, build a vigorous fraud resistant framework and assist you to embed it into your operations. We will also support you to ensure that your anti-fraud strategy remains effective over time as new fraud risks emerge, and as the organizational environment changes.

ABOUT PROETHICS Proethics is a young firm specialized in Fraud Risk Management Advisory Services for private sector businesses, Public sector institutions, and not-for-profit NGO’s and other organizations. Proethics is driven by Adigwe Joseph Okonjo, a qualified Accountant (Chartered Institute of Management Accountants - CIMA, UK; Institute of Chartered Accountants of Nigeria; and University of Nigeria -UNN) with over 17 years experience in statutory Audit and Assurance, Internal Audit, Consultancy, and Financial Accounting and Management in both the private and international NGO sectors. Proethics is supported by a resource pool of professionals with the requisite competencies to deliver a best-of-breed fraud risk management service to it’s clients. Lagos . Abuja . Port - Harcourt Tel : 08072251087 08023401771 Address : 73 Aba Road, Opposite First Bank PLC, Garrison, Port - Harcourt, Rivers State, Nigeria. Follow or message us on our facebook fan page: www.facebook.com/proethicsfraudriskadvisoryservices Email Joe personally at oljo15@yahoo.com

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Proethics Fraud Risk Advisory Services