Fraud Detection: A Proactive Approach

Having a comprehensive fraud control program is the hallmark of a proactive approach. This is because such a program combines both detection and control of fraud. Many at times, fraud happens to exist in an organization for 4-5 years prior to detection (Sadgrove, 2016). In other instances, there is quick detection but lack of suitable control mechanisms. However, by combining both, an organization can detect fraud before it occurs by realizing exposure to the same, filling gaps in existing fraud programs and apply necessary remediation tools in earnest. Meanwhile, the control system can identify fraud that has already occurred and equally apply the best measures of mitigation. More importantly, a comprehensive program helps to cover different forms of fraud both internal and external, utilizing technology and human action (Şerban, 2009). While technological methods can be excellent in detecting fraud, they can mean little if they are not accompanied by human intelligence. A comprehensive system takes advantage of both. Additionally, fraud perpetuated by internal actors may prove hard to prove, and only a comprehensive approach can make it easier. This is because it encompasses both elements under their control and those outside their influence (Albrecht, et al., 2011). Therefore, a comprehensive system is the nearest picture of a proactive approach to fraud detection, while there are also chances of covering different forms of fraud using different augmenting tools.

There are several procedures that can be put in place for detective controls in addition to independent checks and a system of documents and records. These include setting up effective authorization systems in a way that only a certain group of persons are allowed to conduct given tasks (Albrecht, et al., 2011). This makes it easier to hold such individuals accountable as they also look to hold the rest accountable. If their authorization is used irregularly, that would already be a signal of fraud. Another procedure is segregation of duties. In this case, no single person would be allowed to complete a task alone. When a task is completed by more than one person, they hold each other accountable and fraud then requires collusions which may be hard to build. The role of physical controls should also be appreciated. These include keys, locks, safes and other barriers that inhibit unauthorized access to various important documentation and resources (Albrecht, et al., 2011). These can in themselves discourage fraudsters or make it harder for them to carry on their activities. Breaching such controls makes it easy for detection and isolation of those involved. Thus, authorization systems, segregation of duties and use of physical controls are some of the procedures that can be used in detective controls.

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            Establishing a fraud hotline is not enough to prevent and detect fraud. There is need to educate the staff on its uses and what can be reported. There are many organizations that have fraud hotlines that the employees are unaware of, or have no idea when and how they should be used. Such hotlines must be designed for anonymity and have a personal touch with the whistleblower (McNeal, 2017). This implies having real people answer to callers rather than an answering machine or any other non-personal tool. This gives the callers the confidence to disclose more information about the issues they have noted. While most of such hotlines are often meant for employees, it is important to avail them to all stakeholders and open them for us by anyone. Vendors, partners, customers and other stakeholder groups have reported fraud in the past and can play a huge role in making use of a fraud hotline (Sadgrove, 2016). Also important is to make sure that essential information from the hotline is instantly passed to the audit team or board of directors for action.

            There are several recommendations that the CEO should take into account towards providing a culture of honesty, openness and assistance. First, there is need to hire honest people and subsequently train them on fraud awareness. To recruit honest people, the amusement park should conduct due diligence on every potential employee with proper background checks and requiring them to tell the truth about them in the first instance (Albrecht, et al., 2011). Thereafter, they should be trained on the nature of fraud and its risks. Secondly, there is need to create a positive working environment. This includes being governed by certain values and clearly setting out a code of conduct (Albrecht, et al., 2011). Finally, there should be an employee assistance program where individuals get help with their non-sharable problems and other stressors that can lead to fraud.

            Finally, it must be noted that regardless of human nature, a culture of honesty, openness and assistance is possible to build in an organization. There are many strategies that when put in place can ensure that certain values, codes of behavior and ethical standards are maintained (McNeal, 2017). This is hard to achieve though, and requires managerial commitment to accomplish. They should set the example by embracing honesty and openness in all their dealings while offering assistance where needed. It would be misleading to say that human nature prevents achieving such a culture given that fraud is a behavioral instinct that people can be trained to avoid.


Albrecht, W. S., Albrecht, C. O., Albrecht, C. C., & Zimbelman, M. F. (2011). Fraud examination. Cengage Learning.

McNeal, A. (2017). Effective Fraud Risk ManagementJournal of Accountancy223(6), 32.

Sadgrove, K. (2016). The complete guide to business risk management. Routledge.

Şerban, I. (2009). Fraud Risk Management. Theoretical and Applied Economics12(12 (541)(supplement)), 550-556.

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