Executive stealing money Source: Blacknote/Shutterstock

While some may argue that credit unions’ greatest vulnerability is to cybercrime, I disagree – it is in fact to internal fraud. CU Times has reported on a number of credit unions that failed due to internal fraud, while we have yet to see a credit union fail due to cybercrime. We have seen many fraud-related losses at credit unions as well due to poor internal controls, including inefficient processes and countless errors.

Auditors and the insurance company that sells you your bond will tell you it is too difficult to audit or look for fraud. The boiler plate in your audit option points out that it is management’s responsibility to design, implement and maintain a system of internal control relevant to the preparation and fair presentation of financial statements that are free from misstatement whether due to fraud or error. The boiler plate goes on to say that the auditors express no opinion on the effectiveness of the credit union’s internal control. In other words, don’t count on audits as an internal fraud management strategy.

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