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Fraud Risk Awareness Training


Fraud can affect any organisation, from the smallest local firms to the largest multi-national conglomerates, and its impact on reputation and financial health can be enormous. One of the most effective ways to deal with the growing threat of fraud is to provide all staff with comprehensive fraud awareness training; that is, to make the entire workforce Fraud Smart.

This book is aimed at managers, supervisors, team leaders and front-line employees who have no specialist knowledge about fraud and fraud control; in it, Spencer Pickett uses clear, jargon-free language to explain his five stage Fraud Smart process, which is designed to enable the workforce to:

  • Understand the concept and threat of fraud
  • Appreciate the respective roles of different groups within the organisation, and how they fit together to ensure that fraud is kept at bay; which skills do staff already have, or do they need to obtain, to manage this process effectively?
  • Understand and embrace the fundamental concepts of sound business ethics
  • Recognize red flags and be proactive about spotting fraud
  • Master suitable controls and ensure that the appropriate safeguards are in place, and working effectively

It is essential for every business to tackle fraud head on; Fraud Smart provides all the tools necessary to ensure that the risk of fraud is properly managed alongside the wider business risks that face all organizations.

KH Spencer Pickett has an international reputation as a leading author on the subject of internal auditing and specializes in the development of E-learning resources. Please see for further details.
Preface xi


1 What Do We Mean by Fraud? 3

What can go wrong? 4

What do the experts say? 6

Our model explained 8

Income 8

Expenditure 9

Assets 10

Data 11

Our three key conclusions 12

2 A Wide Range of Threats 13

What can go wrong? 13

What do the experts say? 17

Our model explained 19

Simple 20

Complex 21

Internal 22

External 23

Our three key conclusions 24

3 T he Global Scene 25

What can go wrong 25

What do the experts say 28

Our model explained 29

Domestic 30

Foreign 30

Goods and services 31

Financial data 31

Personal identity 32

Image versus reality 33

Our three key conclusions 33

4 Building Your Fraud Smart Toolkit 35

Key learning objectives 35

Part I multichoice quiz 41



5 Fraud Smart Roles and Responsibilities 49

What can go wrong? 49

What do the experts say? 51

Our model explained 54

Corporate anti-fraud policy 55

Fraud prevention 55

Fraud detection 56

Fraud response 57

Our three key conclusions 58

6 Fraud Smart Skills Profile 59

What can go wrong? 59

What do the experts say? 61

Our model explained 63

Compliant 63

Honest 65

Competent 65

Astute 66

Our three key conclusions 67

7 Fraud Smart Training Needs 69

What can go wrong 69

What do the experts say 71

Our model explained 72

Anti-fraud policy 73

Training policy 74

Fraud control responsibilities 74

Current versus required profile 74

Personal development strategy 76

Our three key conclusions 76

8 Building Your Fraud Smart Toolkit 79

Key learning objectives 79

Part II multichoice quiz 84


9 T he Moral Compass 93

What can go wrong? 93

What do the experts say? 95

Our model explained 96

Societal best interests 96

Corporate best interests 97

Personal best interests 98

Our three key conclusions 99

10 Implementing Values 101

What can go wrong? 101

What do the experts say? 103

Our model explained 104

Corporate code of ethics 105

Awareness 106

Disciplinary code 107

Assessment 108

Cultural integration 108

Our three key conclusions 109

11 Whistleblowing 111

What can go wrong? 111

What do the experts say? 113

Our model explained 115

Stance 116

Manager 117

Facilities 118

Experience 118

Awareness and trust 119

Our three key conclusions 120

12 Building Your Fraud Smart Toolkit 121

Key learning objectives 121

Part III multichoice quiz 126


13 T he Ingredients of Fraud 135

What can go wrong? 135

What do the experts say? 137

Our model explained 138

Benefits 138

Access 140

Motive 141

Concealment 142

Our three key conclusions 142

14 Why People Slip Up 145

What can go wrong? 145

What do the experts say? 148

Our model explained 149

Basic salary versus added pressure 150

Personal needs met? 150

Rationalization 151

Legality versus illegality 151

Our three key conclusions 152

15 Recognizing Red Flags 153

What can go wrong? 153

What do the experts say? 156

Our model explained 157

Lifestyle 158

Position 158

Behaviour 159

Our three key conclusions 161

16 Building Your Fraud Smart Toolkit 163

Key learning objectives 163

Part IV multichoice quiz 169


17 T he Control Concept 179

What can go wrong? 179

What do the experts say? 180

Our model explained 181

Control environment 182

Risk assessment 183

Controls 184

Monitoring 184

Objectives, information and communication 185

Our three key conclusions 186

18 Basic Controls 189

What can go wrong? 189

What do the experts say? 191

Our model explained 192

Authorization 193

Exceptions 194

Procedures 194

Verification 195

Supervision 195

Segregation of duties 196

Our three key conclusions 196

19 Fraud Smart Risk Management 199

What can go wrong? 199

What do the experts say? 201

Our model explained 203

Objectives and business strategy 204

Anti-fraud policy 204

Threat assessment 206

Control review 207

Risk management strategy 208

Detection routines 208

Response and fix tools 209

Staff surveys 211

Enterprise risk management 212

Our three key conclusions 212

20 Building Your Fraud Smart Toolkit 215

Key learning objectives 215

Part V multichoice quiz 221

Appendix A C orporate Fraud Smart Policy 227

Appendix B Multichoice Quiz: Answers 245

Appendix C Fraud Smart: Your Score Sheet 247

index 249