Fraud, Investigation & Responsibility

Fraud is an intentional misrepresentation of fact in order to steal the assets of the organisation.
Investigation is the process of inquiring into a matter through research, follow-up, study, or formal procedure of discovery.
Fraud is very hot and ongoing topic in today's corporate world. Enron to Dotcom and now to Satyam, all we talk and think about dealing with fraud. We can see, fraud is universal in nature occurring every part of the world and in every nature of the organisation through every level.
The application of SOX and stringent governance procedure still seems inadequate to prevent and deter the fraud. Research has shown that these laws are barely protecting the investors where evil intentions are prevailed at the top level of management. In the research of the major corporate failures, it was found despite all the governance procedure are functioning, fraud is happening at the different level of organisation.
This has been raising a lot `of questions to the corporate world and doubt to the investors relying on the corporate governance.
Since fraud seems inherent in the business, it is very important we give due importance to incorporate system compatible to the organisation to drive ethics and stringent control mechanism so that impact of the fraud to the organisation can be minimised.
In some of the organisation misunderstanding were found to be prevailed with respect to the responsibility of the fraud. Top management feel that their responsibility towards fraud is discharged by the moment they appoint internal and external auditor. Research has shown that the the top management feel that the auditor are responsible for establishing fraud policy and investigation policy. Lack of understanding of this critical role by the top management has put the corporate world and governance more susceptible to fraud risk.
In the today's context it is very important that the auditor educate top management about the responsibility of audit function with respect to fraud so that there is no ambiguity and hence more robust action to deter fraud can be initiated.
As per the various pronouncement issued by the different professional bodies the primary role to prevent and deter fraud is of management. The auditors are responsible to ensure the audit review by applying professional skepticism in its audit process so that indicators of fraud can be identified.
Further, it is the management who shall establish fraud policy in an organisation in order to prevent and detect fraud.The policy should clearly mentioned the procedure for whistle blowing to investigation process to uncover the fraudulent activities.