SMEs should follow and implement Australian Standard 8001-2008 in their businesses even though it may be challenging to do so. This is because unlike larger companies, many SMEs are not subjected to statutory audit by law (ASIC, n.d.). This puts them at a higher risk as they also may not be equipped with the necessary controls to detect fraudulent activities within the organisation.
While I was serving my internship, I got the chance to audit several SMEs who no longer qualify for audit exemptions in Singapore. After performing audit testing, we discovered fraudulent financial reporting on one of the enterprise due to the fact that the senior personnel was under tremendous pressure to meet financial targets set by the owner manager; where senior employees recorded fictitious revenues in order to meet the targets.
While global organisations such as Volkswagen and Target can survive fraudulent scandals, most SMEs cannot. A study conducted by the Association of Certified Fraud Examiners’ Global Fraud Study 2016 showed that organisations may lose up to 5% of their annual revenue whereas SMEs could lose up to an entire year’s profit due to fraud.
Thus, in order to avoid becoming a fraud, bribery and corruption statistic, it is crucial for SMEs to ensure their corporate culture does not tolerate any fraudulent activities, they should also adopt anti-bribery policies and educate their employees to voice out on improper conduct, with whistle blowing rights to employees whenever they witness any instances of bribery or corruption (Darvall-Stevens, 2016).
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References
ACFE. (2016). Report To The Nation On Occupational Fraud and Abuse - 2016 Global Fraud Study. Retrieved from Association of Certified Fraud Examiners: https://www.acfe.com/rttn2016/docs/2016-report-to-the-nations.pdf
ASIC. (n.d.). Small proprietary companies. Retrieved from Australian Securities & Investment Commission: http://asic.gov.au/regulatory-resources/financial-reporting-and-audit/preparers-of-financial-reports/small-proprietary-companies/small-proprietary-companies-controlled-by-a-foreign-company-and-are-not-disclosing-entities/
Darvall-Stevens, R. (2016). To Mitigate Fraud, Bribery And Corruption Risk, Sme Leaders Must Foster A Desirable Culture. Retrieved from Dynamic Business: http://www.dynamicbusiness.com.au/small-business-resources/leadership/to-mitigate-fraud-bribery-and-corruption-risk-sme-leaders-must-foster-a-desirable-culture.html
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