Fraud in the New Pandemic World – Part 1

Fraud isn’t new. It was here before the pandemic and it will be here after the pandemic. However, the pandemic opened the door to different types of fraud and in some cases makes fraud a little easier. I won’t say these areas of concern were created by the pandemic but it exacerbated the issues by forcing organizations to quickly adapt to the new digital and remote world.

So what is the newest challenge brought on by the pandemic? Inconsistency caused by remote working. Let’s begin with analyzing the definition of remote work. Where does it happen? When does it happen? How does it happen? The problem is there is no clear definition as to what remote working is and I’d go as far as to say that it isn’t defined at all.

Remote workers are not tied to a desk or any physical location and in many cases, they do not work a consistent 9-5 schedule. From the time I was a young staff up until the first 10 years of my career, I knew the physical location of where I was going to work and what hours I was going to be working. I pretty much knew who I was going to see in the office and what clients I was going to be seeing. It was pretty rare that there would be an office closure or a significant change in personnel. In this post-pandemic world, however, unexpected situations happen all the time; closures to facilities, absences of key employees, absences due to COVID contact tracing, and constantly evolving laws and office policies. Organizations need to be able to adapt quickly to ensure their operations continue and that controls are still effective and timely. This inconsistent work environment leaves a big concern for organizations. How do you manage your team when you really don't see them? You’re left with little choice beyond trusting that they're there and there's a lot of risks associated with that. There are many other concerns as well. How do you work with your team and oversee their work when you are not working the same hours? How do you know people are working when they say they are?

Obviously, in the new COVID-world, there is an extreme emphasis on technology. The world started to move more towards a technology-based work environment pre-COVID, but before the pandemic, many areas of internal control were focused on physical documentation. You remember paper right? The paper purchase orders, paper invoices, routing sheets, and physical checks? You know, things that you can touch, that you can tell someone actually signed off on. It was a lot easier to audit, route these things through your control process, and document things. Now, so much of that is done electronically, and more and more organizations and processes are moving digitally than ever before. Of course, that leads to concern. If our electronic controls are as effective, are they sufficient proof that you performed a control? If all you're looking at are scans or computer screens, how do you document that you actually performed the controls, and how are you ensuring they're effective?

Making sure your internal controls are in place and are executed is crucial to protecting your employees and your business. Despite the fact that the world around us continues to change, our responsibility to take control and keep an eye on things remains a top priority.

In part two of this fraud series, I will discuss specific types of frauds and the IT controls you should have in place. You can watch my recorded presentation to learn more about controls, concerns, and responses for payroll, human resources, disbursements and management review on the Brown Edwards YouTube channel.

Watch Chris's full presentation on the Brown Edwards YouTube channel.