One of the biggest issues every successful company face in today’s business world is the prevention of fraudulent activities committed by employees. Over a decade ago the Sarbanes-Oxley Act (SOX) Compliance was introduced which requires that all publicly held companies must establish internal controls and procedures for financial reporting to reduce the possibility of corporate fraud. However with increasing new technologies is this enough to protect companies in 2017?
In a recent study conducted by one of the Big4- on average global companies lost over 5% of revenue to fraudulent actions- the majority of this done by current employees. The reason for this was due to lack of internal controls and no risk management in place. Furthermore the cost to strengthen such internal controls is a considerable investment whether it be in hiring new staff such as internal auditors or specialist fraud and forensic audit professionals. However the cost of such professionals is far less than the loss of earnings suffered by companies due to fraudulent activities conducted by employees.
Companies must also face the costly burden of implementing new software such as Governance Risk and Compliance packages. Combine this with the cost of hiring new talent in the IT Audit arena to process, analyse test and review these controls.
Using new technologies such as the cloud has allowed companies to analyse risk management procedures which look for unusual patterns such as access frequencies, duplicate payments, and splitting invoices
These cloud tools automate controls that uncover these types of preventable risks, but they can also help companies develop a road-map for identifying strategic risks.
It is vital that organisations continue to develop their internal controls, invest in technology and most importantly specialized fraud and forensic audit professionals to mitigate the increasing number of preventable risks which untimely leads to higher profit margins.