Chapter 4: Preventing Fraud Flashcards
1
Q
2 ways an organization can prevent fraud
A
- Create a culture of honesty, openness, and assistance
- Eliminate opportunities for fraud
2
Q
To foster a culture of honesty, openness, and assistance
A
- Hire ethical individuals
- Create a positive work environment
- Implement Employee Assistance Programs
3
Q
To eliminate fraud opportunities
A
- Have a good system of internal controls
- Discourage collusion
- Have a whistle-blowing system
- Create an expectation of punishment
- Engage in proactive fraud auditing
4
Q
To create a positive work environment
A
- Code of Conduct
- Open-Door policy
- Don’t operate on a crisis basis
- Low-Fraud Atmosphere
1 creates the expectation of honesty
3 and 4 require having positive personnel and operating procedures
5
Q
Good Hiring Policies and Practices
A
- Verify all information on the applicant’s resume and/or application
- Require all applicants to certify that all information on their application and resume is accurate
- Train those involved in the hiring process to conduct thorough and skillful interviews
6
Q
Why is collusive fraud so dangerous?
A
It is usually the most difficult to detect and often involve the largest amounts.
7
Q
How to have an effective whistle-blowing system
A
- Anonymity
- Independence
- Accessibility
- Follow-up
8
Q
Strong Fraud deterrent from the expectation of punishment
A
termination isn’t a strong enough deterrent. Pursuing legal action is the best, but it is expensive.
9
Q
5 methods for eliminating fraud opportunities
A
- Having good internal controls
- Discouraging collusion between employees and customers or vendors and clearly informing vendors and other outside contacts of the company’s policies against fraud
- Monitoring employees and providing a hotline for anonymous tips
- Creating an expectation of punishment
- Conducting proactive fraud auditing
