Internal Auditing For Supply Chain Fraud

The supply chain includes the movement of raw materials, components, finished goods, documents, money, services, and data.  The all-inclusive supply chain is not limited to activities between an enterprise and its customers and vendors: it describes interactions between internal suppliers and internal customers as well, regardless of their domestic or global location. Gaps in supply chain links – where controls are not present or lacking – and weak links themselves are areas where opportunists can perpetrate fraud.

Recommending anti-fraud projects to executive management can be problematic because it is difficult to put a price on protecting against something that has not happened or is not visible yet. Without a definitive return-on-investment, determining a suitable budget amount for anti-fraud and risk-reduction projects is an inexact science.  The rest of the enterprise may reject what they perceive to be authoritarian actions of auditors and risk managers to police a "low visibility" problem, especially if operational efficiency or throughput is compromised.  

A better approach is to unite process improvement with risk management by utilizing the same software technologies, operational best-practices, compliance rules, governance guidelines, and performance measures to increase efficiency, accuracy and throughput and also to reduce risk due to fraud by enhancing oversight without inhibiting performance. 

Collaborative efforts between the operations and audit groups, and the understanding of each other's perspectives on the same information, enables greater understanding and mutual participation towards the shared goals of the enterprise.