Fraud prevention practices
Question 3
In the organization, since there are high levels of senior management fraud, the need for designing a control environment that majors on prevention and detection of senior management fraud are effective. For the internal fraud controls, they are not the fire and forget type of fraud. Hence the need for coming up with a smart collaboration and an ongoing improvement that will assist in keeping senior management fraud on the check. Vanderville Plastics Company needs to have a critical effective fraud prevention plan as well as ensuring that they have strong internal controls. The environment of controlling fraud will be effective depending on VPC’s attitude towards fraud as well as the internal controls and ethical organizational culture.
The first essential part is on audit interaction. For the VPC environment to be effective in managing and preventing senior management fraud, there will be the strengthening of internal controls, which entails shifting of attitudes that seniors of the organization have towards auditors. In VPC, the management might view auditors as that police department that is concerned about the internal affairs of the company. Their main focus being ferreting the wrongdoings happening in the company. However, for the company to have a successful design for then, the management should start viewing auditors as critical partners and allies in the battle of fighting against fraud. The company must ensure that then it is reinforcing that role as an auditor’s role of ensuring that they are at the forefront of the corporate policies and procedures, which makes auditors have a valuable source of corporate information. Hence, as a company, VPC must ensure that it has a robust internal control that views the process as a whole and gets a team approaches valuable.
It will help in ensuring the process is effectively managed and that all departments function together interactively. It will help in the creation of issue awareness and strengthening of communication leading to a reduction in the opportunities for fraud and ensuring that they are more comprehensive internal control processes. Further, the company should eliminate all the individually owned internal controls process since one can quickly get the temptation of engaging in fraud activities.
Communication
Interaction with the audit will involve communication, which is one of the ways of strengthening internal controls. All the senior management and employees should be aware of what events are happening within the company. VPC should establish a communication protocol which has to be developed as well as agreed upon in the industry. Further, there must be a critical incident event distribution notification procedures which are put in place for ensuring that every senior management is aware of any fraud event and get an understanding of what their roles are in addressing the issue.
Segregation of duties
One area that will help Vanderville Plastics Company in strengthening the internal control of senior management fraud, adequate segregation of duties will entail custody, authorization as well as control of sources and documents. This will help in ensuring that there is precise information on what is right and not right in the recording. In that case, it becomes easy to identify any fraud happening in the senior management department. For the establishment of fraud prevention practices, the three should be a financial duty which helps in the segregation of duties to different employees. Hence, even though the company does nor not enough experience of internal and external fraud event control, it can work incorporate an environment that helps in fighting senior management fraud.