When a company is confronted with a loss it might have prevented, it is too late. After a litigation process the odds of recovering diminish with each day that goes by. A proactive approach calls for an implementation of adequate internal controls for each transaction cycle where the objectives and procedures for such transaction cycles are fully accomplished.

A well designed internal control should ensure five objectives:

1. Authorization


2. Accountability and comparison


3. Proper recording. Under proper recording, completeness is a paramount. It ensures that transactions are not omitted from the accounting records. The valuation part of proper recording deals with the assurance that transactions are recorded at the actual amounts at which they occurred. In addition it considers, proper classification, affecting the accounts that should be affected by each transaction, and timing of transactions which should be recorded in the accounting period in which they occurred.


4. Protection and limited access


5. Validity.

Transactions' cycles include:

• Revenue Cycle
• Disbursements Cycle
• Cost Allocations Cycle
• Property Control Cycle
• Cash and Investments Management Cycle
• Budget Management Cycle
• Debt Management Cycle
• Financial Reporting Cycle.

A strategic fraud detection approach provides effective ways to detect fraud and, although much emphasis is made on internal control, internal controls alone don’t do any good. The most important fraud deterrent is the perception of detection. Identifying all possible frauds that could occur in an organization is important. To achieve this it is necessary to identify possible indicators for each type of fraud, use means available to gather data about this indicators, prepare a hypothesis, analyze that hypothesis, test it, and replicate this all over again.

The key factors thay should be analyzed when determining the level of risk include: Volume of transactions, procedures in place, authorization process, and prior ocurrences. Minimizing the risk of fraud is achieved through tasks such as identification of primary responsibilities and functions as they relate to internal control, identification of transactions, cycles, and accounting information systems, which are crucial to the achievement of the enterprise's objectives, and identification of obstacles and risks to the organization's financial processing and information systems.