IRM provides six broad services:
- Transactional analysis and validation (TAV)
- Inventory management and modelling
- Review of corporate governance in respect of financial and fraud risk
- Valuations and quantification of damages
- Due diligence and investigation, including business rescue support
- Expert witness and forensic accounting litigation support
We refer you to www.accountantsatlaw.co.za for further details of the forensic services for whom IRM provide consulting support.
IRM post transactional risk management system
Building on its extensive experience in investigative forensic accounting, banking and credit risk management, and general commercial
experience, IRM in conjunction with A@L has enhanced its TAV services.
What is TAV?
Traditional accounting systems are based on agglomerating the underlying transactional financial data to present a summarised, cogent, timeous and reliable set of financial statements that enable decision makers to review the performance, credit worthiness and stewardship of management, as well as for regulatory and other purposes.
Sound corporate governance requires a continuous monitoring of underlying transactions to ensure no material threat faces and organisation Due to the pervasive fraud risk that corporates face, IRM and A@L have designed TAV to deconstruct the underlying financial statement data for purposes of conducting independent and rigorous analysis of such transactional and masterfile data and validating such data against third-party sources. This analysis and validation serves as a basis for enhanced corporate governance and identification of early warning signs of potential risks of fraud and/or questionable transactions affecting an entity.
Controls are intended to prevent questionable transactions from occurring. TAV tests whether transactions, which have been passed through the control process, are questionable, i.e. testing for questionable transactions, abnormal patterns and breaches in controls.
The risk of relying on financial statements The focus of monthly and annual financial statements is fair presentation of the underlying business activities, where it is assumed that there is no material misstatement. Neither internal audits nor independent external audits provide guaranteed assurance that there are no questionable payments or fraud embedded in the financial statements.
IRM, through its extensive forensic experience, has developed a specialist service that analyses the underlying transactional data supporting the financial statements to seek statistical deviations, variances and questionable transactions in the transactional relationships with the various stakeholders of an entity.
The case for TAV
Any entity where the transactions are material and the separation between owners and executives result in the owner not being able to have personal knowledge of all transactions or any entity where there is a requirement to provide enhanced corporate governance assurance as part of fulfilling fiduciary or custodial obligations to stakeholders.
Features of TAV
- Pervasive fraud in present times has a higher opportunity to be identified
- Collusion breaches the best controls • System controls complexity – do not test transactions after the event
- Requirement for more rigorous corporate governance compliance
- Summarised financial data often masks problems
- Pay only for value delivered
- Demonstrates commitment to risk management
- CEOs, Finance Directors, Corporate Governance and Audit Risk Committees benefit from an independent review of potential control breaches by analysing actual transactions
- Provide higher assurance to internal and external audit functions
Inventory management modelling
- Inventories comprise a major asset on the balance sheets of many entities
- Inventories are key to the success of these entities
- There is a perpetual conflict between having too much or too little inventory
- Too much inventory results in excessive working capital and capacity costs
- Too little inventory results in customers not receiving product timeously and invoking potential loss of profits and possibly damages claims for failing to honour contractual obligations
- The best recent example of the impact of temporary failed inventory management is when KFC in the United Kingdom changed its distribution and warehousing partner, which resulted in non delivery of chicken to avid customers who were so distressed that they were reported to be calling their local police station to enquire why their favourite KFC outlets were not meeting their deliveries!
- IRM utilise interactive data analyses to identify the actual inventory behaviour patterns of customers and suppliers, taking into account customer demand, supplier capabilities, lead times, economic order quantities, the costs of a stock out and excessive inventory balances so as to ensure an optimal determination of inventory holdings.
- This can result in significant savings to the entity