CORRUPTION

Corruption is dishonest behavior by those in positions

of power. Those who abuse their power may be
individuals or they may belong to organizations, such as
businesses or governments.
Corruption occurs when someone in a position of power
uses their authority to influence decisions or conducts
any other dishonest or fraudulent behavior like giving or
accepting bribes or inappropriate gifts, double-dealing,
under-the-table transactions, manipulating elections,
diverting funds, laundering money, and defrauding
investors.
Commercial bribery and kickbacks
These involve employees of one company giving
payments, undue advantage or expensive gifts to
employees of another company to secure an advantage.
Examples include paying procurement staff to sway their
decision in favour of the paying company, giving an
expensive gift to a bank manager to secure a loan, and
various forms of kickbacks.
Extortion and solicitation
This occurs when an employee of a company requests a
payment, undue advantage, expensive gifts, or sexual
favours in return for conducting specific business-related
tasks or making particular decisions.
ASSET MISAPPROPRIATION is a critical concern for
businesses of all sizes. It refers to illegal activities where
individuals misuse their position to commit theft or fraud.
This can involve anyone from company directors and
senior personnel to general employees, as well as
external parties like accountants, consultants, or
contractors. Even external suppliers might engage in
theft, perhaps by delivering substandard goods or
services.
The Varied Forms of Asset Misappropriation in the
Workplace

Asset misappropriation takes numerous forms, including,

but not limited to:
1. Skimming: Where employees steal cash before it
is recorded in the company’s accounts, a
challenge because of the lack of an audit trail.
2. Offsite Skimming: Employees working remotely
may engage in unrecorded transactions,
pocketing payments.
3. Direct Theft of Money and Goods: From
pocketing cash in sales transactions to stealing
physical goods, such as office supplies or even
major assets like vehicle parts.
4. Improper use of company assets: Employer
improperly uses company assets leading to wear
and tear and/or maintenance costs on the item/s.
5. Lapping: A deceptive practice where an
employee covers their theft by using funds from
another source, creating a complicated web of
deceit.
6. Employment Fraud: Including the creation of
ghost employees or manipulating payroll for
personal gain.
7. Shell Company Schemes: Involving fictitious
suppliers in the procurement process.
INTERNAL CONTROL OBJECTIVES
Internal control is all of the policies and procedures
management uses to achieve the following goals.

These are the mechanisms, rules, and procedures

implemented by a company to ensure the integrity of financial
and accounting information, promote accountability and
prevent fraud.

 Safeguard assets of the firm

 One of the primary objectives of internal controls is to
safeguard the company's assets from misappropriation,
theft, or misuse. Effective controls establish mechanisms
to track and monitor physical assets, such as inventory
and equipment, as well as intangible assets like
intellectual property and proprietary information. By
implementing separation of duties, authorizations, and
access controls, internal controls help prevent
unauthorized access to assets and reduce the risk of
fraud and theft.

 Ensure accuracy and reliability of accounting records

and information
 Internal controls ensure that management has accurate,
timely and complete information, including accounting
records, in order to plan, monitor and report business
operations.
 Reliable financial reporting is essential for stakeholders,
including investors, creditors, regulators, and employees,
to make informed decisions.
 Internal controls play a critical role in ensuring the
accuracy and completeness of financial information by
validating transactions, maintaining proper accounting
records, and conducting periodic reconciliations. They
 also help identify and rectify errors promptly, reducing
the risk of misstatements in financial statements.

 Promote efficiency of the firm’s operations

 Internal controls provide an environment in which
managers and staff can maximize the efficiency and
effectiveness of their operations.
 Operational efficiency is the ability of an organization to
reduce waste in time, effort and materials as much as
possible, while still producing a high-quality service or
product.
 Operational efficiency is gained through a company by
cost-effectively streamlining its base operations while
eliminating redundant processes and waste. Generally,
this is done by focusing on resource utilization,
production, inventory management and distribution.

 Measure compliance with management’s prescribed

policies and procedures
 Internal controls help to ensure the business is in
compliance with the laws and regulations affecting
the operations of the business.
 Policies and procedures provide a roadmap for day-
to-day operations. They ensure compliance with
laws and regulations, give guidance for decision-
making, and streamline internal processes.
However, policies and procedures won't do your
organization any good if your employees don't
follow them.