RED FLAGS

Fraud Conducted By Employees Against The Company

o    Familiarity with operations (including cover-up capabilities and in a position of trust)
o    Close association with suppliers and other key people
o    A firm that does not inform employees about the rules or the action taken to combat fraud
o    Rapid turnover of key employees either by quitting or firing
o    No mandatory vacations, periodic rotations of key employees
o    Inadequate personnel-screening policies when hiring new employees to fill positions of trust
o    An absence of explicit and uniform personnel policies
o    No maintenance of accurate personnel records of dishonest acts or disciplinary actions
o    Executive disclosures and examinations not required
o    A dishonest or overly dominant management
o    Operating on a crisis basis
o    No attention paid to details
o    Unrealistic productivity measurements
o    Poor compensation practices
o    A lack of internal security
o    Inadequate training programs

Weak internal control environment

o    Management does not emphasize the role of strong internal controls
o    Management does not prosecute or punish identified embezzlers
o    Management does not have a clear position about conflicts of interest
o    Highly placed executives are less than prudent on expenditures for travel and entertainment, furnishings of offices, gifts to visitors and directors.
o    Internal auditing does not have authority to investigate certain executive activities involving heavy "personal" expenditures
o    Accounting policies and procedures are slack

Fraud Committed By Employees Against The Company

o    Significant observed changes from past behaviour patterns
o    High personal debts or financial losses
o    Inadequate income for lifestyle
o    Extensive stock market or other speculation behaviour
o    Undue family, company, or community expectations
o    Excessive use of alcohol or drugs
o    Perceived inequities in the organization
o    Resentment of superiors and frustration with job
o    Undue desire for self enrichment and personal gain
o    Emotional trauma in home life or work life

Mark Burgess Mobile: +27 824677211   Email: mark@collateralrisk.co.za