Chapter 4 - Fraud Prevention

Question 1

The 2 most effective ways to fight fraud

Answer 1

1. creating a culture of openness, honesty and assistance

2. eliminating fraud opportunities

Question 2

creating a culture

of openness and honesty means…

Answer 2

1. hiring honest people
2. creating a positive work environment
3. providing employee assistance programs

Question 3

how do you hire honest people?

Answer 3

1. verify all work info on the application
2. require applicants to affirm the truth of their info provided
3. train managers to conduct skillful and thorough interviews

Question 4

how do you create a positive work environment

Answer 4

1. tone at the top
2. open door policy
3. have positive personnel and operating procedures

Question 5

effective components of a whistle blowing system

Answer 5

1. anonymous
2. independent
3. accessible
4. follow up

Question 6

different ways that companies can eliminate opportunity for fraud

Answer 6

1. good internal controls
2. make fraud policy clear to customers, employees and vendors
3. monitor employees and provide a hotline
4. create an expectation of punishment
5. audit proactively

Question 7

in what ways can organizations discourage collusive fraud?

Answer 7

• periodic letters to vendors to remind them of anti-collusion policy
• right to audit clause on PO’s and invoices

Question 8

How does a response hotline for anonymous tips helps to prevent fraud?

Answer 8

when you know that anyone can suspect something and all in a tip they are less likely to engage in dishonest behavior

a response or follow-up shows that they are taking the tips seriously

Question 9

ways to reduce fraud risk from Attitude/rationalization

Answer 9

• hire honest people
• tone at the top
• training/education of fraud awareness
• ethics policy and codes of conduct

Question 10

ways to reduce perceived pressure to commit fraud

Answer 10

• fair pay
• be cautious about accounting-based pay incentives
• employee assistance programs
• make realistic budgets and goals

Question 11

ways to reduce perceived opportunity to commit fraud

Answer 11

• prosecute and punish offenders
• actively search for fraud
• control activities - internal controls
• whistle blowing systems
• monitoring controls