Concerns were raised last week that many businesses are leaving themselves open to the potential of employees behaving fraudulently, with very costly implications. We speak to Leo Tutt of William Buck and Joanna Bird of ASIC for their advice.
Video transcript below:
Anna Temple, Australian Broker Online
Anna Temple: Concerns were raised last week that many businesses are leaving themselves open to the potential of employees behaving fraudulently, with potentially very costly implications. Leo Tutt of William Buck says there are many different types of employee fraud on the rise most committed by trusted employees and there are definitely red flags business owners can look out for.
Leo Tutt, Partner, William Buck
Leo Tutt: You tend to find that it is a trusted long term employee acting alone. And from the company’s perspective they have placed a great deal of trust in the employee and perhaps they don’t even understand what the employee’s role is and how much control they actually have. The red flags include when you have inconsistent results to what your expectations or what the trends of the industry are. Other examples would be to when key employees fail to take leave because they are reluctant to allow fresh set of eyes in who might discover the fraud. Another example would be where there is a total lack of documentation over key transactions.
Anna Temple: Joanna Bird of ASIC, says in their recent review of industry practice, there are not enough businesses conducting thorough reference checks as part of pre-employment screening . She maintains businesses should have fail safe checks put in place.
Joanna Bird, Senior Executive Leader, Financial Advisers, ASIC
Joanna Bird: What we found was not everybody did proper reference checking. So we found that nearly everybody did a police check, but in fact not everybody did reference checking. If you can’t, if you approach the other, previous licensees and you can’t get proper references, we think that licensees should make sure that they put in place other mechanisms to control the risk created by taking on a new advisor. The sort of mechanisms that licensees could consider would be pre-vetting all advice provided by an advisor for a period of time and we are really heartened to see that some licensees did adopt that a practice which we would consider to be best practice.
Anna Temple: Aside from pre-employment screening, Tutt says there are several other changes in internal processes that could be made in order to negate cases of employee fraud.
Leo Tutt: Physical restrictions over the control of assets and inventory, locking up your inventory, making sure that high value assets are properly recorded and in safe places or, or properly secured. In today’s day and age, we have accounting systems where we can actually produce logs of changes. So we would produce a change log to look at whether there has been any changes that have been made to key accounting transactions. At an operational level, divisional managers should regularly sign off that their employees are known to them. They should also sign off that the suppliers are the proper authorised suppliers. Management should receive proper management reports and they should investigate trends that don’t make sense or the results that don’t make sense and also investigate outlays to what they would expect.
Anna Temple: This is Anna Temple reporting for Australian Broker Online .