This article, focusing on assets, is part of HLB Mann Judd’s fraud review series which takes a closer look at potential areas of fraud and provides tips on how to mitigate fraud.
There are various ways an individual can manipulate assets to conduct fraud. Here we examine two opportunities for fraud, being via the theft of assets and discounted sales.
Theft of assets is the highest fraud risk category in Australia. While there are usually controls in place to monitor assets such as cash, inventory and equipment, how can you ensure these controls are always being adhered to?
- When conducting stocktakes, confirm the guidelines in place deal with variances and ensure high standards of accuracy required are communicated to employees conducting the count.
- Segregate duties between asset purchases, receiving assets and stocktakes.
- Conduct random checks to guarantee controls such as safes and alarms are being locked or activated as per the process.
Example: A warehouse employee is tasked with counting the stock lines they have had access to all year. The employee receives a stock list with the expected quantity on it. They employee ticks it as correct, although they have stolen stock during the year.
Does your business clearly understand the worth of its assets, especially when it comes time to sell? Is there a clear process relating to the sale of assets which realises the highest value possible? If not, employees are capable of selling assets to related parties and/or under its market value and may be able to receive a kickback.
- When assets are sold there should be an approval process in place involving the evaluation of multiple sale avenues.
- If assets are always disposed of to the same individual or company, frequently review the agreement in place.
Example: Obsolete IT products are always disposed of using the same company. Over the years, an employee and acquirer have developed a close relationship. They negotiate a disposal price lower than market value and share the profits.
How HLB Mann Judd can help you
No business is fully protected from fraud. Management must consider what their fraud tolerance is and determine what processes best mitigate fraud.
The Corporate Advisory division at HLB Mann Judd are experts in assisting businesses identify and alleviate fraud.
If you or someone you know are concerned with the scope of fraud in assets, or any other aspect of the business, our team can assist to identify risks, test identified areas and provide specific recommendations to protect against fraud.