Sometimes the way people behave might suggest that they are committing a fraud. These signs are called 'red flags'. Although by themselves they may not be any cause for concern, a few together might make you think that something isn't quite right.
'Red flags' could be:
- significant changes in behaviour that you've noticed
- an individual has large personal debts or financial losses, and a desire for personal gain
- audit findings deemed to be errors or irregularities
- transactions taking place at odd times, odd frequencies, or involving unusual amounts or to odd recipients
- internal controls that are not enforced, or often compromised by higher authorities
- discrepancies in accounting records and unexplained items on reconciliations
- missing documents, or only photocopied documents available
- inconsistent, vague or implausible responses arising from inquiries
- unusual discrepancies between the client's records and confirmation replies
- missing inventory or physical assets
- excessive voids or credits
- common names or addresses of payees or customers
- alterations on documents (such as back dating)
- duplications (such as duplicate payments)
- collusion among employees, where there is little or no supervision
- one employee has control of a process from start to finish with no segregation of duties
