How Internal Audit Protects Your Business from Fraud

🛑 The First Line of Defence: How Internal Audit Protects Your Business from Fraud

Fraud is a persistent and costly threat, yet many UK businesses still rely on detection after the damage is done. In an era of increasing sophistication in financial crime, and with new legislation like the 'Failure to Prevent Fraud' offence looming for large organisations, a proactive defence is no longer optional—it is critical.

At Barnett & Co Accountants, we view Internal Audit not as a compliance burden, but as your most strategic resource in the fight against financial misconduct.

The Crucial Difference Between Internal and External Audit

It is a common misconception that external auditors are responsible for finding fraud. While they are required to look for material misstatements in historical financial statements, their primary focus is on reporting accuracy.

In contrast, Internal Audit is a continuous, forward-looking activity. Our core purpose is to evaluate and improve the effectiveness of your risk management, control, and governance processes. This places us directly in the unique position of providing assurance that your anti-fraud controls are robust and operating effectively right now.

The Three Pillars of Internal Audit's Anti-Fraud Strategy

Our approach focuses on three interconnected areas to establish a truly resilient control environment:

1. Proactive Risk Assessment (The 'Where' and 'How')

We work with management to systematically identify where your organisation is most vulnerable to fraud. This goes beyond simple financial risk and encompasses all areas where assets (cash, inventory, data, or intellectual property) could be misappropriated.

We analyse the classic 'Fraud Triangle'—Opportunity, Pressure, and Rationalisation—to understand the environmental and systemic factors that could facilitate fraud. This focused assessment allows us to target our efforts where the risk is highest, such as procurement, expenses, or complex IT systems.

2. Strengthening Preventative Controls (The 'Stop it Before it Starts')

The most effective way to combat fraud is to prevent it. Our work scrutinises your preventative controls, offering practical advice on best practice for segregation of duties, which is perhaps the most fundamental control.

For example, ensuring the person who approves an invoice is not the same person who processes the payment drastically reduces the opportunity for fraudulent transactions. We verify that controls—such as dual authorisation limits and mandatory supplier vetting procedures—are not only designed correctly, but are being strictly applied in practice.

3. Continuous Detection and Assurance (The 'Ongoing Monitoring')

Fraud schemes are becoming increasingly complex and often involve exploiting technology. Our internal audit team is equipped to leverage modern data analytics tools to monitor large volumes of transactions for anomalies and patterns that would be invisible to manual checks.

This continuous monitoring approach allows us to:

• Identify Unusual Trends: Spotting high-volume expense claims or sudden increases in a specific vendor's invoices.

• Review System Access: Ensuring that employee access rights are limited to what is strictly necessary for their role.

• Evaluate Whistleblowing Channels: Providing assurance that your confidential reporting mechanisms are effective and that tips are acted upon appropriately.

💡 The Cost of Inaction: Independent studies show that organisations with strong internal audit functions suffer significantly lower losses from fraud and detect schemes much faster than those without. Investing in preventative controls is a fraction of the cost of recovering from a major fraud event.

Protecting Your Future

Fraud risk is dynamic and constantly evolving. By partnering with Barnett & Co Accountants, you gain an independent resource committed to safeguarding your financial integrity, protecting your reputation, and providing your board and stakeholders with the assurance that risks are being effectively managed.

Do not let the vulnerability of outdated systems and processes expose your hard-earned assets.

Secure Your Business Today

If you are concerned about your organisation’s exposure to financial misconduct or simply want an independent health check on your controls, please contact our specialist Internal Audit team.

• Address: Electra House, Electra Way, Crewe, CW1 6GL

• Phone: 0345 646 1516

• Email: info@barnettandco.uk

• Website: www.barnettandco.uk

Barnett & Co Accountants: Beyond the numbers, into the control.