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ADDING VALUE WITH A FRAUD RISK MANAGEMENT PROGRAM
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By Justin Watkins – Staff Accountant
Many things can instantly bring an organization dependent upon donors to its knees. However, none are more powerful, and often times more public, than those of the fraud variety. Though it is a point belabored throughout numerous audit procedures, training guides, and tips for better organizational practices, when it comes to fraud and our endeared NFPs, an ounce of prevention is truly worth a pound of cure.
Earlier this year, the AICPA released the 2013 Audit Risk Alert: Not-For-Profit Entities Industry Developments. Within it, the authoritative minds suggest that firms get more involved in the overall fraud risk assessment process. By engaging management and members of the board to generate a formal "Fraud Risk Management Program" for their organization, the AICPA insists that firms can add exceedingly more value to the average fraud risk assessment. According to the guidance offered within the Alert, the fraud risk assessment should foster the creation of the organization's Fraud Risk Management Program by identifying and exploring the following items:
- Fraud schemes that could potentially occur.
- Concealment strategies for the aforementioned schemes.
- The individuals within and/or outside the organization who pose the highest risk of committing fraud.
- The controls currently in place to both detect and deter potential frauds.
- A descriptive list of indications, warning signs, and red flags pertaining to fraudulent activity that can be used to train individuals within the firm to identify fraud before it happens.
Although many of these items appear similar to procedures firms may already perform, taking the added initiative to help a not-for-profit help itself by formulating a Fraud Risk Management Program, as outlined above, is a value added activity that can prove to be a marriage conducive to both a healthy client relationship and best auditing practices.
Sources: Duvall, Matthew. "Fraud Risk Management Programs: Does Your Organization Have One? Potential Fraudsters Want to Know." NonProfitAccountingBasics.Org. Greater Washington Society of CPAs, n.d. Web. 12 Sept. 2013.
AICPA. 2013 Audit Risk Alert: Not-For-Profit Entities Industry Developments. N.p.: n.p., 2013.
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