Study on Informatio
Introduction A new report has shown that almost half of the Asia-Pacific companies are confident of their internal fraud controls (Singapore Press Holdings Limited 2005). But here’s the fact: Only 16 per cent of economic crimes in the region were detected by risk-management systems. In fact, the vast majority of incidences of economic crime were detected by accident, tip-off, and internal and external audit (PriceWaterhouse Coopers 2003). Here in the case study of Informatics Group (Singapore) Private Limited was the 84 per cent where the conspiracy was exposed.
The company reported that its business entity owned, Computer Assisted Learning (CAL), had submitted false National IT Literacy Programme (NITLP) claims of S$347,000 to Infocomm Development Authority of Singapore (IDA) (Commercial Affair Department, Singapore Police Force 2005). In the conspiracy, Rudy Kua with his accomplices primarily draw on the weakness that there was no alternate checks in placed in submitting the claims to IDA.
On top of that, the lack of accountability in receipt and payment by CAL from and to other companies respectively enable them to conceal the evidences of their crime.
We identified the issue as a fraud act committed by the employees of CAL. In further examine the conspiracy, we noted that CAL has two main loopholes in their business practices that resulted in employee taking advantage of it and hence violated the ethical issues. Firstly, the lack in senior management’s commitment and responsibility for identifying risk exposures to fraudulent. Secondly, the need for establishing controls, policies and procedures for prevention and detection of these activities.
In general, we stress that CAL may be placing too little attention on the development of effective controls and alternative checks and balances. 2.
CAL management should be responsible for the implementation of controls to mitigate the key fraud risks within their areas of responsibility. Business that involves any kind of reporting and claims of large sum should go through the management for acknowledgement before cascaded down to the different delegated units for approval. CAL management should establish policies and procedures in critical business practices such as Accounts and Finance that are subjected to high risk of fraudulent activities. Internal Audit Committee should impose regular supervision and internal checks.
The policies and procedures should be reviewed at least annually and seek the approval from Internal Auditor. CAL management should ensure a segregation of duties and separation of functions of their employees in critical business practices such as Sales. This will prevent the employees from being too familiar in the position and hence enable them to find the loophole and commit fraud in the business practices. CAL management should nurture a culture in which the business environment has minimal temptation for an employee to commit fraud.
This includes creating open and consistent communication between management and employees.
Employees should believe their concerns will be taken seriously, addressed in the workplace and that the protection given by the law and policies is real and useful in reporting fraudulent activities. Finally, CAL management should act as a role model for the employees in promoting awareness of ethical principles. Awareness of ethical conduct can be increase by rewarding employees who promote within interpersonal communications. Education of fraud and prevention should also be actively communicated to employees.
These would enhance to set the tone within the company and help deter fraudulent activities.
4. Its Rationale and Its Development Nearly one in four Singapore companies was hit by fraud last year, with 23 per cent of Singapore’s larger companies have experienced fraud, according to the KPMG Singapore Fraud Survey Report (The Straits Times 2008). It further stated that their errant ways cost the companies dearly. On average, each fraud sets the company back by $4. 4 million last year, up from $1.
4 million per incident in 2004, the report revealed.
Corporate fraud has been around for as long as commercial enterprise has been in existence and it affects all countries and all sectors of the economy. A company will suffer tremendous loss of value and market capitalization once the shareholders and the public loses trust in it. Employee fraud at its very worst can bring down the company as in the case of Nick Leeson and his exploits at Barings, cause considerable financial loss or lost of trust in a company as demonstrated in this case on Informatics Group (Singapore) Private Limited.
The rationale behind the Anti-Fraud Policy is to ensure that the company committed to the highest possible standards of openness, integrity and accountability in all its business practices.
A Fraud Policy was then developed to reinforce the company’s approach by setting out the ways in which employees or members of the public can voice their concerns about suspected fraud. It also outlines how the company is going to implement the policy to educate employees of the ethical conduct.
