Big role for internal auditors as fraud spikes in pandemic

 

Institute of Corporate Directors Malaysia chair Zarinah Anwar says auditors should now broaden their focus from detection to prediction of control failures and risk triggers. (Reuters pic)

PETALING JAYA: Internal auditors have a big role to play in the current business environment, with increasing fraud during the pandemic a major concern around the world.

Zarinah Anwar, chairman of the Institute of Corporate Directors Malaysia, cited a recent study by global consultancy Ernst & Young which found an increase in respondents identifying fraud as a top risk area for their firms during the pandemic.

“Possible reasons are changed controls and processes to accommodate the remote working environment, conflicts and segregation of duties resulting from resuming from a reduced workforce, and increased incentives to commit fraud due to the economic environment,” she said at the Governance in Audit Virtual Forum 2021, hosted by the Institute of Internal Auditors Malaysia.

The former chair of the Securities Commission Malaysia said that with more businesses on high alert, “the ability for internal auditors to independently assess and report on the effectiveness of governance, risk management and control processes and to provide the board and management an informed and unbiased critique must be safeguarded”.

Aside from ensuring integrity, she said, other areas of corporate governance have emerged that require flexibility from internal auditors.

They include employee health and well-being, physical return to work, supply chain and global trade, technology and information security, and liquidity and working capital.

Zarinah said that ensuring best practices are followed and providing an advisory role for these new areas can allow internal auditors to add great value to business, if they have the flexibility to capitalise on these emerging trends.

“Auditors must first scale up efforts to develop their skill sets and reconsider their approach to execution, employ new technology that will facilitate dynamic risk identification and prioritisation, broaden their focus from detection to prediction of control failures and risk triggers, and focus on the root causes of issues to enable businesses to implement improvements,” she said. - FMT