Corruption and fraud risk analysis
In German, the terms “corruption” and “white-collar crime” are used instead of, and largely synonymously with, “fraud”.
Transparency International defines corruption as “the abuse of entrusted power for private gain”.
A further more detailed definition according to the Deutsches Institut für Interne Revision (DIIR), corruption/fraud refers to
“illegal actions that manifest in deliberate deception, concealment, or abuse of trust. Such actions are not subject to a threat of violence or the use of physical violence. Malicious acts (criminal offenses) are committed by the parties involved and by organizations in order to obtain money, assets or services, to avoid payments or the loss of services, or for personal gain or a commercial advantage.”
Execution of corruption and fraud risk analyses
A corruption or fraud risk analysis aims at identifying and assessing the risk potential of an organization with regard to corruption and fraud, the gateways to white-collar crime. Based on the results of the risk analysis, the client will be given recommendations for action to prevent corruption in the future.
Parallel to the fraud risk analysis, the internal control system (ICS) of the organization can be identified. This inventory does not constitute an audit of the internal controls, such as with an internal audit, but only a survey of the existing regulations and tools. This measure provides information on whether the theoretical design of the ICS is suitable for controlling the identified risks.
A corruption or fraud risk analysis provides information to an organization regarding its present situation and any need for action. It is another important tool for executives which enables them to comply with their due diligence obligations regarding the protection of an organization’s assets.