Financial Crime World

Czech Republic’s Top Fraud Prevention Practices: A Look at Deloitte’s Expertise

Prague, Czech Republic — Daniel Zielke, Central Europe Forensic & Dispute Practice Leader at Deloitte Advisory s.r.o., discussed the latest best practices for fraud risk assessments and prevention in the Czech Republic. The informative talk took place on November 24, 2011.

Defining Fraud and Emphasizing the Importance of Fraud Examination

  • Zielke defined fraud as “wrongful or criminal deception intended to result in financial or personal gain.”
  • He emphasized the significance of fraud examination, which aims at obtaining evidence, reporting, testimony, and assisting in the detection and prevention of fraud.

Common Fraud Schemes in the Czech Republic

According to Zielke, financial statement frauds, asset misappropriation, bribery, and computer fraud are common fraud schemes in the Czech Republic. Research indicates:

  • 50% of fraud cases relate to corruption in sales and procurement.
  • These fraud cases result in losses between 300,000 and 1 million Euro.
  • Perpetrators are typically male employees who have been with the company for over five years and hold positions in accounting, operations, or procurement.

The Differences Between Auditing and Fraud Examination

  • Zielke highlighted the adversarial nature of fraud examination.
  • The fraud examiner’s mindset focuses on finding evidence and proof of fraud as opposed to a traditional audit’s goal of finding errors.

Red Flags for Potential Fraudsters

Some red flags for potential fraudsters include:

  • Living beyond their means
  • Control issues
  • Unusual relationships with vendors and customers
  • Refusal to take vacations
  • Past employment or legal problems

One significant trend in fraud prevention is the implementation of Continuous Controls Monitoring (CCM). CCM:

  • Monitors controls in ERP (Enterprise Resource Planning) and financial applications.
  • Improves financial governance and automates audit processes.
  • Reduces business losses by efficiently detecting and preventing fraudulent activities.

Fraud Risk Assessment Practices in the Czech Republic

The Czech Republic’s top fraud risk assessment practices include focusing on high-risk areas, implementing a fraud hotline, and utilizing employee support programs. Companies illustrate the importance of:

  • Implementing proper cybersecurity measures.
  • Staying up to date on the latest IT fraud trends (e.g., TJX’s failure to secure their IT systems resulted in significant losses).

The Role of Fraud Examiners and Advisory Firms in Fraud Risk Assessment and Prevention

As businesses grow increasingly aware of the importance of fraud prevention:

  • The role of fraud examiners and advisory firms in fraud risk assessment.
  • Identification of red flags.
  • Anti-fraud control implementation becomes more recognized.

Technology’s Role in Minimizing Operational and Financial Risks

Technology plays a significant role in minimizing operational and financial risks as it allows for:

  • More efficient testing processes.
  • More reliable and efficient controls.
  • Increased compliance cost savings for businesses in the Czech Republic and beyond.