Fraud auditing in banking sector: A research on characteristic of experienced fraud cases

In a world global interaction and technological developments increase precipitously, excessive competition drives the diversity of commercial entities and products proliferate with every passing day. Dizzyingly intensifying pressure of excessive competition and the passions and desires toward higher life standards and living luxuriously effect the escalation of faults and frauds. Both of faults and frauds damage companies. Faults are not deliberate and contain lack of knowledge, carelessness, and neglect. Frauds, on the other hand, involve private wealth building through misusing the resources and assets of the enterprise deliberately. Faults and frauds in accounting systems are observed to multiply. This situation leads knowledge-users --who are compelled to ground their decisions on financial statements which are manipulated by incorrect and deceitful processes-- to make flawed decisions Banking industry also consists of rapidly globalizing large-sized organizations having widespread service networks and product diversity, and in which technology is used intensively and pressure of competition is felt deeply while a great amount of operations are tied up in a brief period of time. Furthermore, financial services directly dominated by money are provided in it. In this context, frauds and faults are inevitable in banking industry which deals with money directly and ties up such great transactions in such a fast pace. It is fundamental for top management tooversee the entire business organization from the center to prevent or to minimize the emergence of faults and frauds in corporations. Accordingly, to establish and to run an efficientinternal control system embraced by whole organization. A survey has been conducted in the context of this study covering the frauds experienced in banking industry. The participants stated that they run approximately 3 extraodinary and 5 to 10 routine inspections a year and almost all of the participants testified to have ancountered at least one deceptive transaction every time. They expressed that such deceptions usually took place at sales departments of branches and cashiers desks and also operations departments. It was found by the participants that those who were entangled in such deceptive deals were mostly low-ranking employees and middle level managers whose ages were between 31 and 40 and experienced 0 and 10 years. They noted that those transactions are mostly rendered by married and male employees. The most encountered from of fraud appeared as impairing customers interests without their knowledge and these frauds were located usually at the offices which were audited 2 year and more than 2 years ago. The participants also stated that these fraudulent practices were usually prosecuted legally, while those who conducted such transactions were perceived as well-adjusted individuals by their friends and other people around and the personel who services to same customer in all time. Like high targets and sales pressing and higher life standards and living luxuriously effect and also banks opportunity working conditions are caused frauds on employees. Total amount of loosings with frauds is over 5 million Türkish Lira. Additionally, a great majority of the participants heve agreed upon internal control as an efficient method for precluding frauds. Among three bank categories, which are privately-owned banks, puplicly-held banks, and interest-free participation banks, participants of the survey have maintained that no significant difference existed in terms of fraud incidents.