Internal Corruption is Often Caught with Internal Audits, Identifies Rachel Daddesio
Opportunity is one of the most common reasons for internal corruption and fraud. When people feel as though they can get away with it, they will. Internal audits can be used to red flag the issues before it becomes too devastating for the company. Rachel Daddesio, CPA, explains why companies should be scheduling audits on a regular basis.
Rachel Daddesio recommends that a company schedule an internal audit at least twice a year. Larger companies may want to schedule more frequently in order to catch issues quickly. The audits should be conducted by a consultant as opposed to an employee. This ensures that issues are actually caught as opposed to being ignored.
Awareness and prevention help with deterring fraud and corruption. Rachel Daddesio explains that many people won’t commit fraud for the company they work for, especially if they know that internal audits are scheduled randomly.
Often, the red flags that appear in everyday operations are ignored. They’re passed off as administrative errors. Rachel Daddesio explains that people are often able to get away with corrupt activities because their co-workers assume the best of them. They cannot conceive of an employee actually doing anything illegal.
The reason for an internal audit is to shine a light on the red flags. It’s easier to identify the issues and follow the trail to determine who or what is responsible for them. In some instances, it is an administrative error. In some instances, it is because of not having sufficient protocol in place. Then, as Rachel Daddesio explains, it may be that someone was given the “keys to the kingdom.” They didn’t have any oversight in place, and, therefore, they thought that they could commit fraud and get away with it.
Rachel Daddesio explains that audits will go over the financials closely. It will explore the separation of duties, the presence of management approvals, and explore system controls. It will also involve following the money trail so that it’s easy to see where the money is coming in and going out. If there are gaps in the trail or money doesn’t add up, it can show that there’s corruption in place or poor system control.