Past Payable Auditing

Ok so Covid-19 has struck! The economy is in a meltdown... What happens next?

Do companies stop buying their essential services and products?

If no, then how are they procured? How is the product delivered- does the purchase requisition, quotations, bidding, purchase order, invoicing, good received note process still kick in?

Or Covid-19, gives companies or its executives the leeway or the loophole to play with the system and over-ride the system for their personal benefit?

Thinking of which, fraud investigators would be challenged with complex engagements of something called “past payable auditing”. The procurement affected by intermediaries at the time of Covid-19 and lockdown circumstances will be audited post companies re-opening their corporate operations on full strength.

The following factors would have to be take into consideration:-

1.       Quantity

2.       Quality

3.       Pricing

4.       Comparative quotations

5.       Approvals

6.       Maker- Checker

7.       Actual requirement/ Hoarding/ Black Marketing

8.       Imitation and copyright Issues

9.       Vendor due diligence

10.   Payment terms

11.   Commissions paid

12.   Suspense accounts including marketing and “donations”

13.   Misuse of corporate social responsibility fund

14.   Inflow and outflow of funds

15.   Bribery and corruption- compliance to various acts

16.   Tax including GST

17.   Regulator compliances

18.   Revenue and cost booking

The above are a few indicators of unusual use of any company assets or red flags that could emerge as lull before the storm for the upcoming period.

Would be sharing further inputs in future articles. For fraud risk awareness training for corporate and write-up please contact me on the below:

Raunaq Chawla

http://raunaqchawla.blogspot.ae/

craunaq.1987@gmail.com

+91-9650668585

Happy to help with a smile!

RBI Bank Penalties- What does it mean?

RBI Bank Penalties- What does it mean?

Here comes another burning issue of RBI penalizing Banks for irregularities in their modus operandi.

And the count is not small mind you. It is around 13 banks including co-operative ones.

The CBI has been conducting search and seizure operations and has found irregularities in working requirements and the rules and regulations to be followed and governed by the Supreme regulatory authority that is RBI.

Time and again this issue of Know Your Customer (KYC) not being followed properly has come to the fore front. This time it is coupled with advance import remittances.

Bank of Baroda has a glaring Rs. 6,000 Crore Forex related irregularities. It has been fined to the limit of Rs. 5 Crore, HDFC by Rs. 2 Crore and Punjab National Bank by Rs. 3 Crore.

The fraud involves import payments that never happened in reality for Bank of Baroda.  Work as usual, weak internal controls. Anti- Money laundering channels were bypassed. Timely reporting was not done. The Suspicious Transaction Reporting process to the Financial Intelligence Unit was over looked.

Similarly, for HDFC it involved anti-money laundering guidelines not properly followed and bills of entry for import remittances not being properly accounted for.

Similarly, Rs. 5 Lakhs penalty on the Co-operative City Bank, Guwahati, Rs. 2 Lakhs  on Indapur Urban Cooperative Bank of Pune, Rs. 1 Lakhs on Model Cooperative Urban Bank, Hyderabad.

All said and done this brings further the need of Forensics and Continuous Auditing. Internal Controls are not up to the mark and regulator not being taken seriously.

We need to ensure the following:

·         Vigilance

·         Transparency

·         Timely Reporting

·         Fairness

·         Continuous Audit

·         Independence- Maker Checker

·         Timely Review

·         Fraud Risk Management Procedures

·         Proactive rather than reactive

·         Tone at the top

·         Whistleblower Mechanism

·         Ethical Hotline

·         Internal Benchmark ratings

·         Balance- Quality Vs. Targets

·         Preventive/ Detective Controls

To do post mortem is easy but to nip the matter in the bud is utmost important. At the same time deterrents need to be in place to stop from happening again. It cannot be stressed that if we lose public confidence in the system like this time and again we will not be able to progress and move to a better tomorrow!

Would be sharing further inputs in future articles. For fraud risk awareness training for corporate and write-up please contact me on the below:

Raunaq Chawla

http://raunaqchawla.blogspot.ae/

craunaq.1987@gmail.com

+971-562642495/ +91-9650668585

Happy to help with a smile!

Red Flags: Bribery and Corruption

Red Flags: Bribery and Corruption

Thanks friends for the tremendous response on the blogs written by me. I will continue sharing thought leadership on various topics.

Today I would like to touch upon the aspect of a much prevalent and discussed factor of bribery and corruption in business.

We at Risk Consulting/ Forensic/ AML/ Compliance always look out for “Red Flags” or “Indicators” in lay man language to discover if a fraud or misconduct has happened or about to happen.

Bribery and Corruption as per ACFE can be described as “wrongful use of influence for the benefit of the actor/ other person contrary to the duty or rights of others”.

This includes but not limited to bribery, kickback, illegal gratuity, economic extortion and collusion etc.

The Foreign Corrupt Practices Act of 1977 (FCPA) Act covers bribery and corruption of companies listed on the US stock exchange and is one of the primary acts against which the fraud is dealt with and necessary future course/ action is taken in line with the principles of the act. Facilitation payments no matter how small of value to fasten the work process are also covered under the act.

The Red flags or Indicators to look out for are as follows:

• Something of significant value is requested as a personal favor to get a contract awarded
• Commission paid to carry out/ fasten day to day or normal work
• Foreign travel or meals of family members of a person who can influence some work
• Request for transfer of money to third parties/ own/ family accounts
• Gifts given to influential management persons or government officials
• Kickbacks are disguised as marketing and promotion or miscellaneous expenditure
• Certain expenses mentioned above are much higher in comparison to actual revenue generated
• Request for sexual favors in exchange of work done
• Lifestyle of a person is way beyond the means he has
• Fees given to agents in the process where intermediary actually not required
• Wiring money through offshore/ shell companies

Would be sharing further inputs in future articles. For fraud risk awareness training for corporate and write-up please contact me on the below:

Raunaq Chawla

http://raunaqchawla.blogspot.ae/

craunaq.1987@gmail.com

+971-562642495/ +91-9650668585

Happy to help with a smile!