Systemic Fraud and Error

David Lawler, Expert Forensic Accountant, Forensic Risk Alliance (FRA), UK

The procurement function is the key to success in most manufacturing businesses. It is the business process involved from recognising that something needs to be acquired, through to ordering and paying for it. At the same time, it is the highest risk process, and the area in which most frauds and corrupt payments occur, Despite the potential risks, businesses are increasingly reliant on automated controls and expert systems to spot and prevent frauds and unauthorised transactions. But it is very dangerous to think that these systems are infallible. We are seeing a worrying over-reliance on software: this leads to de-skilling of the finance and audit teams, who become less capable of spotting anomalies. Unfortunately, as businesses look to source goods from lower cost (and higher risk) countries, this reliance multiplies the risks, rather than reducing them. Instead, companies need expert input from seasoned fraud and corruption professionals both in designing controls, and in their review and audit. Periodic data analytical review – by expert humans leveraging software, rather than relying on it - is an effective way to mitigate these risks.

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United Kingdom Forensics General April 2014 Vol. 7, No. 27, Spring 2014

David Lawler

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David Lawler is an expert forensic accountant with 25 years’ experience in white collar and anti-corruption investigations, insolvency litigation, and in valuing and appraising troubled, declining or formative businesses. David frequently serves as an expert witness on profitability, viability, and value, and assists companies to appraise and tighten their financial controls and procedures, including regulatory compliance programs. David is currently performing intensive reviews and tests of the FCPA/anti-corruption systems and controls in place at overseas branches of several multinational energy and mining companies, including extensive compliance audits in South America, West Africa and Asia. David is the author of the textbook, ‘Frequently Asked Questions in Anti-Bribery and Corruption’ published by John Wiley & Sons in March 2012. Prior to joining FRA, David trained as a Chartered Accountant with Deloitte, before moving to set up the London forensic capability at Kroll, and then at Begbies Traynor. David Lawler, Partner, at Forensic Risk Alliance email: dlawler@forensicrisk.com phone: +44 (0)207 269 7835

FRA (Forensic Risk Alliance)

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Forensic Risk Alliance (FRA) is a consulting firm with offices in the US, UK, France and Switzerland. It helps businesses to resolve complex and high-risk financial, legal and regulatory challenges. Its people provide independent, conflict-free advice and litigation support services, often in the local language as its team speaks virtually all of the world’s key business languages, including most European languages as well as Arabic, Mandarin and Cantonese Chinese, Malay and Bahasa Indonesia. FRA collects and analyzes data for use in legal disputes and investigations (often cross-border) in a number of areas, including litigation, fraud, bribery and corruption investigations. The company has extensive worldwide project experience in Latin America, Asia, Europe, Africa and the Middle East. FRA is one of only ten companies in the world approved to carry out validation audits for the EITI (Extractive Industries Transparency) Initiative which evaluate how well a country’s government conforms to the EITI’s standards of transparency in reporting revenue received from the extraction of natural resources. . . . . . . . Members of the FRA team also provide expert witness testimony in court when required and have recently contributed two chapters to the Serious Fraud Office’s book ‘Serious Economic Crime – a boardroom guide to prevention and compliance’.

United Kingdom Forensics General April 2014 Vol. 7, No. 27, Spring 2014