Fraud prevention: when did you last stress-test your controls?
Fraud risk can increase as organisations grow, restructure or face financial pressure. Yet many control frameworks are not reviewed or updated until after an incident occurs.
Organisations are increasingly expected to evidence proactive fraud prevention, not just the actions taken after the event to identify issues and minimise losses.
Why this matters now
The introduction of the Economic Crime and Corporate Transparency Act, and particularly the Failure to Prevent Fraud offence, (effective since 1 September 2025), has increased the focus on corporate accountability. The onus is on organisations to demonstrate that suitable fraud prevention procedures are in place. Fraud prevention is a board level governance issue as well as a finance function responsibility.
Key areas for review
It is important organisations don’t become complacent over time or assume controls are stronger than they are. Common areas for improvement include:
- Segregation of duties and overreliance on limited number of individuals
- Ongoing relevance and effectiveness of policies and procedures
- Independent assurance over the operation of key controls
- Keeping fraud risk assessments aligned to organisational change
- Cyber security and resilience
- Understanding the impact of culture and incentivisation on behaviour
What is the cost of inaction?
Prevention is always better than the cure. Beyond initial direct loss of funds, the impact of fraud can also extend to:
- Reputational damage
- Financial penalties
- Investigation and legal expense
- Operational disruption and diversion of management time
- Regulatory exposure
How we can help
Fraud prevention requires a coordinated, structured approach, requiring the following:
Independent fraud risk assessment
Conducting a review of the organisation’s fraud risk profile to identify emerging threats, changes in operating environment and gaps in existing controls.
Control design and effectiveness testing
Assessing whether the organisations fraud controls are appropriately designed and operating effectively in practice, including walkthroughs and identification of control gaps.
Targeted transaction analytics
Using data analytics to identify patterns, anomalies and high-risk areas within financial and operational data and carrying out sample testing on identified risk areas.
Culture and awareness assessment
Reviewing the organisation’s fraud awareness, employee incentivisation, training programmes, and whistleblowing mechanisms to ensure employees understand fraud risks and how to report concerns.
Review of existing governance and board reporting
Evaluating current governance structures, escalation routes and reporting mechanisms to ensure fraud risks are clearly communicated to senior management and the board, with appropriate oversight and accountability.
Practical roadmap
Developing a clear and prioritised action plan outlining proportionate recommended improvements, control enhancements, ownership and a timeline for implementation.
Ongoing monitoring and continuous improvement
Establishing mechanisms for continuous monitoring of fraud indicators and enabling the organisation to adapt to emerging threats and structural changes.
Contact the experts
At Moore Kingston Smith, our forensic accounting team is experienced in conducting fraud risk assessments and implementing tailored solutions. Contact us to find out how we can help you protect your business.
