The South African Institute of Corporate Fraud Management is committed to improving the lives of the South African citizens and those of its neighbours.

Economic crime and ethics abuse affects everyone in measurable ways not least of all by draining economies and increasing the costs of living for ordinary consumers.

Economic crime and fraud red flags contributes to joblessness and deprives the government of much needed revenue to fund grass roots projects and infrastructure development.

High levels of bribery and corruption along with economic crime in a country creates a negative image in the eyes of the international community and discourages investment leading to further job losses. Higher levels of unemployment lead to higher levels of petty crime and violent crimes.

Of course, we are living in a global village. The state of our neighbour economies has a direct impact on our own. It would not only be immoral, but irresponsible to ignore their plight. That is why we are as committed to helping our neighbours as we are toward helping our own people.

The Institute is a non-political philanthropic organisation dedicated to being part of the South African solution and it’s Renaissance. To this end The Institute fully supports the policy of quiet diplomacy of the President of South Africa as it relates to Zimbabwe. The Institute believes any boycott or sanction of Zimbabwe given the present humanitarian crises would not only worsen the lives of the already beleaguered average Zimbabwean but could lead ultimately to further destabilising the entire region.

Our Mission is to promote ethical and responsible leadership - to provide a resource for citizens to report ethics abuse anonymously while ensuring absolute confidentiality - to vigorously oppose any regulations, statements of standards, corporate governance tenets or laws which might give rise to or serve to promote conflicts of interest in private business or the business of government.

Fraud Red Flags:

This fraud red flag tool provides opportunity red flags, personal characteristic red flags, and situational pressure red flags of possible fraudulent activity. It also provides indicators of possible fraudulent activity for various business processes including accounts payable process, purchasing process, payroll process, cash receipts process, accounts receivable process, inventory/production process, and finance process.

1. OPPORTUNITY RED FLAGS

Fraud Conducted By Employees Against The Company

• Familiarity with operations (including cover-up capabilities and in a position of trust)
• Close association with suppliers and other key people
• A firm that does not inform employees about the rules or the action taken to combat fraud
• Rapid turnover of key employees either by quitting or firing
• No mandatory vacations, periodic rotations, or transfers of key employees
• Inadequate personnel-screening policies when hiring new employees to fill positions of trust
• An absence of explicit and uniform personnel policies
• No maintenance of accurate personnel records of dishonest acts or disciplinary actions
• Executive disclosures and examinations not required
• A dishonest or overly dominant management
• Operating on a crisis basis
• No attention paid to details
• Unrealistic productivity measurements
• Poor compensation practices
• A lack of internal security
• Inadequate training programs

The following are representative examples of symptoms or red flags of fraud:

Accounts Payable Process

• Recurring identical amounts from the same vendor.
• Unusual even dollar or high cash disbursement amounts for routine odd dollar or low value purchase.
• Multiple remittance addresses for the same vendor.
• Vendor addresses do not agree with vendor approval application.
• Sequential invoice numbers from the same vendor or invoice numbers with an alpha suffix.
• Payments to vendor have increased dramatically for no apparent reason.
• Lack of segregation of duties between the following:
• Processing of accounts payable invoice and updates to vendor master files
• Check preparation and posting to vendor account
• Check preparation and mailing of signed checks
• No proper documentation of additions, changes, or deletions to vendor master file.
• Excessive credit adjustments to a particular vendor and/or credit issued by unauthorized department (credits involving quantities and price).
• Systematic pattern of adjustments to accounts payable for goods returned.
• No reconciliation performed of accounts payable subledger to general ledger control account.
• Insufficient supervisory review of accounts payable activity.
• Lack of documentation for payment of invoices.
• Cash disbursements for unrecorded liabilities and routine expenses (e.g., rent) when all expenditures must be vouchered prior to payment.
• Excessive miscodings to same expense account.
• Payments made on copies of invoices, not originals.
• Paid invoices not properly canceled, allowing for reprocessing.
• High volume of manually prepared disbursement checks.
• Unrestricted access to blank checks, signature plates, and check-signing equipment.