The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

INVENTORY theft is list the most common fraud witnessed in the Bahamas, the Association of Certified Fraud Examiners (ACFE) local chapter presidnt said yesterday, adding that Bahamian companies must have the necessary controls in place to prevent this.

Speaking with Tribune Business yesterday at a seminar hosted by the ACFE and Bahamas Institute of Chartered Accountants (BICA), Kendrick Christie, a certified fraud examiner and partner at Grant Thorton, said Bahamian businesses need to have a very robust code of ethics informing employees what constitutes fraud and theft.

“Inventory fraud is a big thing in the Bahamas. Due to the fact that a lot of businesses in the Bahamas are more retail and service-based businesses, you see a lot of inventory issues, right out pilferage, theft of inventory, liquor, finished goods and materials,” said Mr Christie.

“You have to have physical controls and inventory counts. We see a lot of that, and cash larceny where persons are stealing cash after it has been deposited, and lapping, where persons steal before the cash has been deposited.

“A lot of times these things happen because a company has lax controls. We also have manipulation of financial statements. It’s not as pronounced, because we don’t have a big market in terms of shares, but we have to be careful with that, too. We see persons motivated by bonuses and profit attempting to hide expenses to increase the net income.”

Mr Christie said the ACFE planned to offer offer several free clinics in the New Year, where business owners could come and ask questions on how they can minimise cash and inventory fraud.

“During the Christmas season, when things are hectic, we want persons to take a look round their business, look at their employees, look at their cash, vehicles, and then do an assessment of what are the deficiencies,” Mr Christie said.

“You have to make the message clear to employees that you believe in the code of ethics, and be careful about your hiring. Owners have to understand that they are a part of the control mechanism as well; they have to be involved.”

Stacy Johnson, the ACFE (Bahamas Chapter) vice-president, told Tribune Business: “We are very passionate about bringing about fraud awareness and trying to get companies to understand that prevention is better than even detection.

“What we are finding is that a lot of small and medium-sized businesses do not seem to appreciate the fact that it is important to be aware of fraud risks in an organisation, and take the steps to detect it and prevent it from happening again.”

John Swain, a partner at Grant Thorton, who gave a presentation on internal auditing, told Tribune Business: “We find that a lot of companies are affected by fraud because they don’t have a strong internal audit department, and not only that, but the department is not independent.

“A lot of them, instead of reporting to the audit committee or Board, they report to the financial controller or other senior managers, which impacts their independence. It’s important that the internal audit department be independent and they have unrestricted access to information in order for them to carry out their function.

“Once they are independent and have unrestricted access, and good communication with all levels in the company, it allows them to be able to carry out reviews of the existing controls and systems to see whether or not they are doing what they were implemented for. It’s very important in order for any company to be successful; they need to have some form of a strong internal auditing department.”