Red flags of Financial Frauds: Compilation for the Auditors (Academic Books Book 1)

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HKD 1, List Price: HKD 2, HKD 2, Customer Service. Currencies: HKD. You have no items in your shopping cart. Order tracking. Search again here by Google! Compare Books. You have no items to compare. Sign Up for Newsletter:. Fraud Auditing and Forensic Accounting 4th Edition. Author: Tommie W.

Singleton; Aaron J. Disclaimer: Countri es stated herein are used as reference only. Hong Kong: free delivery order over HKD Brief History of Fraud and the Anti-fraud Profession. The Fraud Cycle. Review of Technical Literature. Forensic Accountant and Audits. Forensic Accountants. Fraud Auditors. Keys to Effective Fraud Investigation.

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Chapter 4 Red Flags. Professional Standards. As part of the study, in a questionnaire-based survey was conducted among bank employees of the National Capital Region NCR area. Moreover, the second part encompassed the issues about how to integrate technologyin the banking industry in order to detect and prevent frauds in Indian banks. All the respondents were selected through the random sampling method. There were 42 public sector banks in the area and finally, 21 banks were selected. The sampled employees comprising of Managers, Officers and Clerks of the branches were given the questionnaire by personally visiting them in bank.

In all, there were 57 managers, officers and clerks as respondents and grouped on the basis of the following parameters, as shown in Table 3. The RBI, being the overall central regulatory agency, has developed many important guidelines for prevention of bank frauds, which can help banks to prevent frauds. In the first part of the questionnaire, we focused on the compliance level of these security controls were measured under the following six heads—internal checks, deposit accounts, administration of check books and passbooks, loans and advances, drafts, internal accounts and inter branch accounts.

The results of this study indicate that the security control measures are not fully complied with. Thus, education, training and awareness programs are informal intervention measures that should be implemented to prevent frauds. Table 4 depicts the average compliance score of Bank Managers under the various heads. Table 5 provides a snapshot of average compliance scores of Bank Officers under the various heads. Surprisingly, Bank Officers gave the lowest scores to the following two areas viz. Keeping in view the Bank Managers and Officers scores, we can draw a broad conclusion: nobody likes to perform the work especially in the administration of check and pass book section.

Hence, Mangers awareness level is high as they have increased level of responsibility. It is amply clear from Table 8 the awareness level is very low, both on the part of Clerks and Officers in Banks. For example, only 9.

Another Receipt Fraud to Consider

However, Managers show a little better awareness level. For example, around It is very disappointing to know that the awareness level of Bank employees about various types of frauds and losses suffered by the banks are very low. Hence, with this dismal scenario, how can we expect from them to follow detailed procedures and guidelines issued by the RBI and take pro-active actions to prevent frauds and mitigate bank losses? Table 9 depicts the relative importance on 10 point score assigned by the Bank Managers, Officers and Clerks to the reasons responsible for the commitment of bank frauds.

Managers gave more weightage to lack of training 7 , and followed by overburdened staff 5. In sharp contrast to this, both Officers 6 and Clerks 7 felt that overburdened staff is the main reason responsible for bank frauds, which is followed by lack of training for Officers 5 and Clerks 6 , respectively. To conclude, as shown in Table 11 ,survey respondents indicated that frauds in their organizations were most commonly detected through customer complaints, followed by an internal or external tip, which is in line with global trends.

Banks response to fraud is critical as it has the ability to prevent future occurrences.

Any response to fraud should be swift and effective so as to percolate the right message to employees. While theresponses received in our survey indicate that banks haveset up a dedicated fraud investigative cell, it appears to be hampered by thelack of dedicated technology tools for investigation.

The second part of the questionnaire focussed very specifically about the use of technology in banks. Accordingly, we asked the Bank Employees and Bank Managers regarding the most effective methodologies used by them in banks to detect and prevent frauds. However, only one in every three respondents appears to be entirely satisfied with it.

Since banks are increasingly depending on technology, it is not surprising to find that cybercrime continues to increase in volume, frequency and sophistication. Interestingly, mortgage portfolio also appears to be increasingly vulnerable to the risk of fraud. In fact, ninety-four percent felt that the demand for FCAs would increase in the next 10 years. Recently, the banking industry around the world has undergone a tremendous change in the way business is conducted. Table 18 shows the results.

The respondents rated each of these four tools as important, with data mining being rated as the most important with a mean score of 5. Discussion on frauds cannot be complete without analysis of human behavior. An employee in a bank is like a fish in a small ocean. Nobody can determine when and how much water a fish has consumed.


Likewise a corrupt and dishonest person in a bank can commit frauds with impunity. The time taken for cases to be ascertained as fraud was very high. Delays in reporting of frauds further delay the alerting of other banks about the modus operandi through caution advices that may result in similar frauds being perpetrated elsewhere.

More than 7, employees of different PSBs are under the scanner for their involvement in these cases. There is lack of trained and experienced bank staff, and tremendous increase in banking business. By-and-large, new recruits do not have adequate training or experience before they are put into a responsible position.

Undoubtedly, training improves the capabilities of employees by enhancing their skills, knowledge and commitment towards their work. The life has become fast and the bank staff does not have enough time to scrutinize documents thoroughly. Dilution of system and nonadherence to procedures is also a significant reason for bank frauds.

This shows that a full-proof system has not been developed and implemented to familiarize the bank employees of various types of frauds that take place in banks every year. The primary responsibility for preventing frauds lies with individual banks. Major cause for perpetration of fraud is laxity in observance in laid down system and procedures by supervising staff.

However, the RBI routinely advises banks about major fraud prone areas and the safeguards necessary for prevention of frauds.

This is done so that banks can introduce necessary safeguards by way of appropriate procedures and internal checks. With growing usage and dependency on electronic forms of transaction, banks have employed more secured means and platform separate from the normal channels of communication. We would like to make the following three recommendations to the banking industry: a Push top management to implement policies that encourage moral behavior and demonstrate an ethical culture. These should include specific fraud schemes that could be perpetuated against the bank; and c Prepare an anti-fraud policy and create appropriate training which clearly defines fraud and misconduct.

Technology is like a double-edged sword. On the one hand, perpetrators are using it to further fraudulent schemes; on the other hand, we are making some of our best progress using the same technology. Undoubtedly, technology can prove helpful in fraud detection and prevention in banks. The cat and mouse game will continue. Neural Networks have been extensively put to use in the are as of banking, finance and insurance.