Managing Fraud Risk: A Practical Guide for Directors and Managers

A Question of Black or White

I am sitting in a meeting room at the headquarters of one of the largest retailing groups in the UK, which is situated in the West End of London. It is October 1996. I have been working here for two weeks now, so this is just about the mid-point of my assignment. I am here to review the group's purchasing and payments systems on behalf of Touche Ross forensic services and the Finance Director has set us a challenge. He believes that the controls over these systems are very tight and he has commissioned us to test them out. In particular, he does not think that there are any weaknesses in them from a fraud perspective. So, this is our challenge – as forensic accountants and fraud experts, can we find any faults with his “fraud-proof systems”? Actually, it is a challenge that I have taken up personally because I have already told the Finance Director that he is wrong – there is no such thing as an internal control system that is guaranteed to be fraud-proof. We shall see – there is a pint of beer resting on the outcome. I have to report back to the Finance Director with my findings and recommendations by the end of the month. Not long at all.

I am coming to the end of a meeting with two of the key managers that I need to speak to on this project: the group's financial controller and the team leader of the cashiers and payments section in accounts. It has been a good meeting and I have learnt more about the company's systems as a result. However, there ...