Fraud risk strategies for SMEs

Even if you don’t have to comply with Sarbanes Oxley, the Revised Combined Code, ISA 240 or FSA regulations on financial crime strategies, few if any companies can ignore the threat of fraud, says David Alexander . This is not perhaps because the incidence of fraud is necessarily increasing but because when it does occur, shareholders, bankers and other investors want to know what precautions the company directors had taken to prevent or limit the damage. Ignorance of fraud is no longer a defence. The ostrich type attitude of ‘it won’t happen to me’ is no longer acceptable. Fraud is now recognised as a business risk to be managed in the same way as any other business or financial risk.

David Alexander is a partner in Alexander Forensic Accounting LLP, a new practice specialising in fraud and forensic accounting services. He has over 15 years’ experience advising clients on fraud and forensic accounting issues, the last five as a partner in a big four accounting practice. David is a Regent Emeratis of the Association of Certified Fraud examiners and has been a CFE since 1992. He may be contacted on tel: +44 (0) 121 240 4666; email: info@afallp.co.uk. The Association of Certified Fraud Examiners (ACFE) is the world’s premier provider of anti-fraud training and education with over 35,000 members. For more information, visit www.acfe.com

A great deal of time and effort has been spent over the last two years by companies seeking to comply with Sarbanes Oxley and in particular Section 404: Management assessment if internal controls. For many this has been a Herculean task involving dedicated teams of internal auditors and line managers carrying out risk assessments, documenting and testing controls, practically round the clock. In this frenzy of control assessment activity there is a real danger that the ultimate prize, effective anti-fraud programmes and controls, has been drowned in a sea of compliance jargon and over-complicated processes.