Reflective Writing Task – Blog #1

I disagree with the statement that governance and managerial processes have nothing to do with incidences of fraud. 

I witnessed a case of fraudulent activity due to a lack of governance whilst working at a software company.  A disgruntled employee was able to change banking information on vendor records.  The employee then paid substantial invoices electronically to a fraudulent bank account.  There was no company policy in place that required either multiple authorisations or high level management approval to change banking information on vendor and employee records. The company relied solely on honesty regarding this process. 

Implementing simple management processes could have prevented this fraud. The risks to the business if governance is not introduced include significant monetary losses, loss of credibility and potentially expensive litigation costs.

The role of IT governance in particular could have prevented such a crime from occurring.  An example would be, installing a system that requires a separate security point for vendor and employee bank account changes.

It is argued by Kusnierz (2006) that an organisation is simply unable to eliminate systematic fraud without the implementation of managerial processes and technologies that centre on fraud prevention.  This is too backed up by Farber (2005) who stated that “empirical evidence indicated that weak corporate governance is associated with financial reporting fraud”. 

Reference List

Kusnierz, R. (2006). Fraud doesn’t matter? Credit Control, Vol. 27 Nos 4/5, pp. 61-64. Retrived from http://search.proquest.com.ezp01.library.qut.edu.au/docview/208151291/abstract/B7BBF813B7154AA0PQ/1?accountid=13380.

Farber, D.B. (2005). Reporting trust after fraud: does corporate governance matter? The Accounting Review, Vol. 80 No. 2, pp. 539-561. Retrieved from http://search.proquest.com.ezp01.library.qut.edu.au/docview/218592597?pq-origsite=360link.