Whistleblower policies, critical to uncovering fraud — Expert

A seasoned and distinguished Chartered Accountant, Francis Ohaegbu, has described whistleblower policies as an important and critical tool for uncovering fraud.

While speaking on the theme, ‘Relevance of Whistleblower Policies to Uncovering Fraud’, at an event held in Lagos on Thursday, Ohaegbu noted that in the world of business finance, the integrity of financial statements is foundational to corporate governance and the trust that stakeholders place in an organisation.

As a seasoned Chartered Accountant with extensive experience in financial reporting, management, and corporate accounting, Ohaegbu identified two major forms of fraud—misappropriation of assets and fraudulent financial reporting.

These, according to him, can severely undermine a company’s credibility and long-term viability.

He said, “Misappropriation of assets occurs when employees steal or misuse company resources for personal gain. For instance, a cashier at a retail store in Lagos may pocket cash from sales, skimming off the top before entering the day’s takings into the system. Fraudulent financial reporting, on the other hand, is more sophisticated and typically involves senior management.”

Ohaegbu gave the example of a tech start-up in Abuja where financial executives overstate revenue to attract investors. “This gives a distorted view of the company’s financial health, which is misleading and detrimental in the long run.”

“These forms of fraud are not hypothetical,” Ohaegbu asserted, adding that they are widespread issues often encountered in businesses with weak internal controls. “The risks posed by such fraud highlight the critical need for businesses to bolster their financial oversight to safeguard against these threats.”

Ohaegbu stressed the importance of basic principles to strengthen internal controls. “In small businesses, for example, the individual who approves transactions should be separate from the one who records them,” he explains.

“This simple separation of duties significantly reduces the chances of fraud or error.” He also advocates for regular reconciliations and audits as effective tools for early fraud detection. “Frequent reconciliations of bank statements and routine internal or external audits are essential to catch discrepancies before they escalate.”

He cited the example of a manufacturing company in Kano that conducts monthly inventory reviews to prevent misappropriation of assets. “These checks not only catch discrepancies but also help in identifying areas where controls may need to be tightened.”

Ohaegbu also emphasised the value of leveraging advanced accounting software to strengthen internal controls. “Sophisticated accounting tools automate transaction tracking, providing detailed records that enhance accuracy and transparency,” he said.

By implementing such software, businesses can reduce the possibility of human error and increase efficiency in monitoring financial transactions.

In addition to technological measures, Ohaegbu highlighted the importance of educating employees on the significance of honesty and integrity in financial reporting.

“A well-informed employee is less likely to commit fraudulent acts, as they understand the ethical standards expected of them. Whistleblower policies are another critical tool for uncovering fraud.

“Encouraging employees to report suspicious activity without fear of retaliation can help detect fraud early and protect the organisation,” Ohaegbu added.

A key aspect of maintaining financial integrity, according to Ohaegbu, is the tone set by management. “The leadership team must lead by example.

“When top management demonstrates ethical behaviour, it sets the standard for the rest of the organisation, fostering a culture of honesty and accountability.”

As a member of prestigious accounting bodies, including the Institute of Chartered Accountants of Nigeria (ACA), Ohaegbu emphasised the importance of adhering to global best practices in financial management.

The expert acknowledged that while the risk of fraud in financial reporting and asset management is a serious concern, it is by no means insurmountable. “By instituting strong internal controls, conducting regular financial reviews, and fostering an ethical work environment, businesses can greatly reduce the likelihood of fraud,” he stated.

“As we move into an era where financial transparency is paramount, it is essential for organisations to commit to practices that ensure financial statements accurately reflect the true health and potential of the business.”

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