Prevention of Financial Frauds - Assignment Example

Prevention of Financial FraudsAbstract This paper is primarily based on a profoundly important and critical issue of the world which has become more of a dramatic emergency presently and is related to the prevention of financial frauds. Prevalence of the phenomenally grave problematic issue like financial frauds is a serious threat to the stabilization of any country’s economical power. It remains a reality that the criminals behind almost all the fraud cases involving deliberate mishandling of intricate financial transactions for personal gains are found to be the white collar experienced business professionals who have skilled criminal approach.

This paper presents evidence related to how such deceitful criminal activities have threatened the financial security of millions of people around the globe already. Various strategic practice models for financial fraud prevention have been proposed in the recent years and some of them are discussed in this proposal. 1. Introduction: Financial frauds are widely perceived to be various deliberately made criminal acts seriously violating civil law while based on financial transactions and meant to attain myriad personal benefits.

For the past many years, research reports have been illuminating that the need to combat financial frauds has become increasingly important and inevitable concerning its widespread proliferation and the immense threat it poses to the older citizens especially, though this criminal issue largely involves people of all ages as well. From frauds planned on a large-scale and committed to weaken the roots of national economy to small-scale financial frauds like fake lotteries and work at home plots, this criminal issue has largely succeeded in building many holes in the net of financial security which was once strong and meant to preserve the public protective.2. Research review: A layered security approach and effective tools are required to handle this dramatic emergency of felonious financial frauds and by controlling who first receives sensitive documents like bank statements, small organizations can prevent financial fraud occurrence (CBIA News, 2007).

Expert policy-makers and researchers at (Research Centre on the Prevention of Financial Fraud, 2009) proposed a three-fold strategy to prevent the financial fraud proliferation around the globe. Consolidating information in an attempt to compile the fraud research for providing a disciplinary support to the policy-makers can help in preventing huge losses based on billions of dollars and occurring every year as a result of financial frauds. Secondly, effective anti-fraud messaging delivered via electronic medium can help in connecting research to policy.

Funding is also important to protect the fraud victims and finance research for financial fraud prevention. People in many cases remain unaware that they have become the victims of financial frauds because such frauds are often operated on the legal fringes by skilful scammers or business professionals (Button, Lewis, & Tapley, 2009). According to Levi (1988), the main aim of an employer and even auditor is to eliminate criminal activities out of business however, it is almost impossible to eliminate fraudulent activities from business.

Frauds can be made by people who are employed in the organization which is referred to as internal fraud or it can be made by people with whom company is conducting businesses such a fraud would be called as external frauds. Though, there are certain measures that can be taken in order to reduce such fraudulent activities from businesses. Following measures have been identified by Levi (1988) to reduce the chances of fraudulent activities in an organizationHiring employees that are reliable as well as employees that have sufficient references.

Maintaining a good system in the organization which can be monitored by the managers and internal auditors on a regular basis.Organization should have the policy of firing staff and prosecution for fraudulent activities.Not allowing senior managers or top management to dominate the company.According to the research report published by (Bank Negara Malaysia, 2010), most of the financial frauds mimic legitimate courses so that the victims remain satisfied and do not think about pointing out at the fraudsters who are white collar criminals.

“An unscrupulous investment broker may present clients with an opportunity to purchase shares in precious metal repositories, for example. His status as a professional investor gives him credibility.” (Bank Negara Malaysia, 2010). Tracking such quack business professionals who have a tendency to rob the innocent citizens by presenting fake investment opportunities to them with the help of ontology technology can also help in preventing and detecting financial frauds. “A fraud forensic ontology is being developed from laws, regulations and cases about illegal solicitation of financial products on the web.

” (Zhao & Meersman, 2006). Assessing an organization’s state of fraud risk can also help in preventing this grave issue and conducting interviews with stakeholders should be made a vital part of this assessment. This can help in gathering data and information about the areas which have the greatest fraud risk. (Adams, et al., 2006). The main focus of auditing has shifted from detecting financial frauds manually to technology based prevention of financial frauds. Even though there are some frauds that cannot be prevented however with the use of different auditing software, auditors can get considerable amount of assistance in identifying areas where fraud can occur.

Several auditing software have the ability to include internal checks with which managers as well as auditors are able to identify and detect irregular relationship that assist in prevention of financial frauds. There are several software and applications like Computerized Audit tools and Techniques (CATTs) which have allowed auditors to review almost 100% of the transactions so in this way the auditors are in a better position to effectively recognize frauds in the financial statement (Rezaee, 2002).3. Conclusion: Summing up, this much becomes clear from the above discussion that the need to tackle the ferocious crime of financial frauds is evident presently since it is causing losses of billions of dollars nearly every day both at national and public level.

It cannot be simply termed as a corporate fraud affecting only large firms, businesses, and conglomerates. Rather, it is a widespread issue since it also involves deceitful scams and lotteries which are designed to rob the innocent public of their hard-earned fortune. The need to raise awareness about the nature of financial frauds and generate a deep understanding of fraud victimization among the common public can actually prove to be an effective step towards financial frauds prevention at grass-root level.

References:Adams, G.W., Campbell, D.R., Campbell, M., & Rose, M.P. (2006). Fraud Prevention:An Investment No One Can Afford to Forego. The CPA Journal. Retrieved from http://www.nysscpa.org/cpajournal/2006/106/essentials/p56.htmCBIA News. (2007). Nine ways to Prevent fraud in your workplace. The Journal of the Connecticut Business & Industry Association, 85. Retrieved from http://www.cbia.com/cbianews/2007/05/200705SB_PreventFraud.htmBank Negara Malaysia. (2010). What is Financial Fraud? Retrieved from http://www.bnm.gov.

my/microsites/fraudalert/01_what.htmButton, M., Lewis, C., & Tapley, J. (2009). Fraud typologies and victims of fraud: literature review. Retrieved from http://fraudresearchcenter.org/2011/10/fraud-typologies-and-victims-of-fraud-literature-review/Levi, M. (1988). The Prevention of Fraud. Retrieved November 3, 2011 from http://library.npia.police.uk/docs/hopolicers/fcpu17.pdf Crown: LondonResearch Centre on the Prevention of Financial Fraud. (2009). Combating Financial Fraud. Retrieved from http://longevity.stanford.edu/financial-security-2/combatting-financial-fraud/Rezaee, Z. (2002). Financial statement fraud: prevention and detection.

New York: John Wiley and Sons.Zhao, G. & Meersman, R. (2006). Towards a Topical Ontology of Fraud.