Information Governance: Fraud Detection and Prevention in Organizations

INFORMATION GOVERNANCE 1
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INFORMATION GOVERNANCE 2
Introduction
Information systems provide dishonest employees holding key job positions an
opportunity to implement and develop a fraudulent scheme. Acccording to Surdak (2014, p. 56)
overriding internal controls may create a conducive environment for fraud to occur hence the
need for internal auditors who are specialized in information systems who can identify fraudulent
acts that are taking place in the company. This allows the company to put some preventative
measures in place to reduce the possinle occurrence of fraud. But if fraud has already taken
place, internal auditors are the ones who are tasked with leading the investigations.
This article analyzes fraud by a certain employee, involving falsification of the records
of the business, breakdown of management controls and internal information technology and
failure to segregate duties. Its main purpose is to introduce us to an employee fraud that is very
common and show us how we can use professional guidance to deal with such a situation.
Case summary
Healthy hospital has an internal audit department with two auditors specialized in
information systems. One of the hospital’s standard operating procedures was to run a
background investigation when hiring employees who are to hold sensitive positions in the
organization. Also, the hospital’s policies prohibited members from the same family to work in
sensitive departments as it would impact the integrity of the company’s documents. Otherwise,
this should be a red flag that the internal auditors should raise as such situations create a
conducive environment for potential fraudulent acts.
The internal auditor is the tasked to start fraud investigation in case it occurs. He starts
by analyzing all copies of relevant reports on the information system and review of the

INFORMATION GOVERNANCE 3
department involved in the fraudulent activities procedures so as to discover all loopholes that
led to the fraud. Also, for the successful investigation of fraud, the internal auditor requires total
cooperation from other departments if required. This is because; accounting information systems
provides information necessary for the internal auditor to prevent, and in the case of occurrence,
to detect fraudulent practices in the organization. This is to inform all the management personnel
about the fraud and inform them about the potential legal and disciplinary actions to take.
1. Reasons contributing to the prospect of this farud
The occurrence of this fraud shows that the Hospital’s internal controls have made fraud
minimization and detection difficult therefore making it easy for employees to commit this kind
of a crime. It also shows that this accountant had the requisite knowledge and skills to commit
this kind of irregularity and to preserve the evidence. This shows that the hospital requires a
more sophisticated approach from detection to prevention, to be able to cab these frauds. The
occurrence of his fraud also shows that when controls are broken down, fraud is likely to occur
and in most cases, it might go undetected for a longer period.
Where one can perform multiple duties involved in a transaction, fraud risk increases.
This is perfectly shown in our case where the perpetrator carried out different duties by himself,
therefore, no obstacle towards committing the fraud. This indicates that if there was a separation
of duties in the first place, chances of this fraud occurring would have declined dramatically.
Also, the fact that the hospital’s documents could be easily modified inclines the employees
more to engage in this kind of irregularity. In this case, several documents were forged and also
printing and mailing checks which were used in this act. We can also see that, when the
accountant supervisor was on vacation, it allow the accountant time to commit and try to