Ecuador’s Fight Against Fraud: Implementing Robust Internal Control Systems
In Ecuador, combating fraud is a pressing concern. To tackle this issue, researchers have emphasized the importance of implementing robust internal control systems as a key factor in preventing corrupt activities.
Forms of Corruption in Ecuador
According to the Organic Criminal Code (COIP), embezzlement, illicit enrichment, bribery, and influence peddling are among the primary forms of corruption that need to be addressed.
Strengthening Internal Controls
To address this issue, the Ecuadorian government has implemented measures aimed at strengthening internal controls within public institutions. The Agreement 39-CG2008 outlines the necessary components of an effective internal control system, including:
- Control Environment: Establishes a culture of compliance and ethics within organizations.
- Risk Evaluation: Identifies potential risks and assesses their likelihood and impact.
- Control Activities: Implements processes to mitigate identified risks.
- Information and Communication: Ensures accurate and timely communication of information.
- Supervision Activities: Monitors and reviews internal controls.
Incorporating the Balanced Scorecard Method
Researchers have proposed incorporating the Balanced Scorecard (scorecard) method as a tool for evaluating internal controls. The scorecard is traditionally used as a strategic planning tool, measuring organizational performance and evaluating corporate goal achievement. Its flexibility and ease of application make it an effective tool for detecting fraud.
Internal Control Evaluation Matrix
To further streamline the evaluation process, an internal control evaluation matrix was developed, combining the scorecard method with audit and documentary forms. This tool generates questions, establishes weights, and defines key performance indicators, allowing auditors to identify risk situations that can lead to fraud.
- Benefits:
- Generates insights into risk levels and confidence intervals.
- Enables ranking of components to demonstrate their critical nature and interference with organizational objectives.
- Provides a foundation for an improvement plan.
Auditor’s Role in Fraud Detection
In Ecuador’s fight against fraud, special attention must be paid to audit work’s responsibility and scope, as well as the auditor’s role in fraud detection. To achieve this, auditors can combine management tools with internal control components to reduce audit complexity and prevent fraud.
Conclusion
The Balanced Scorecard method has been praised for its ability to analyze financial and non-financial indicators, assisting in risk identification and fraud detection. However, it is essential that sufficient, relevant, and competent evidence is collected, and the matrix is adapted for each audited organization to consider legal basis, legal nature, and related regulations.
By implementing robust internal control systems and promoting a culture of integrity, honesty, and ethical behavior, Ecuador can effectively combat fraud and prevent corrupt activities.