Fraud Prevention Programs Flashcards
How do you sell fraud prevention to management?
By showing them the impact on the bottom line - fraud can be very expensive. Its much more cost effective to address fraud risks than to spend on detecting, investigating etc.
Also can point out the negative publicity / impact on profit.
What are some examples that an anti-fraud policy include?
A detailed anti-fraud policy should outline the types of actions that are considered to be fraud
Examples of fraudulent offenses include:
Using company equipment (e.g., office supplies, company vehicles, mobile phones, computers) for personal reasons
Stealing company assets (e.g., cash, receivables, inventory)
Inflating reported hours worked
Forging or altering checks and other documents
Disclosing proprietary information to competitors
Accepting bribes from or paying bribes to vendors or customers
Engaging in transactions in which the employee has an undisclosed conflict of interest
Destroying company records with malicious intent
Intentionally misstating financial statements
What is the most effective fraud prevention method?
Increasing perception of deception
**most experts agree that it much easier to prevent fraud than detect it.
How can a strong corporate culture be observed?
By its outcome, rather than by any individual component.
Fostering a culture of ethics and compliance runs deeper than implementing a checklist of initiatives.
What is fraud assessment questioning?
Fraud assessment questioning is a non-accusatory interview technique used as a part of a normal audit.
Examples of questions that can be used in this approach include the following:
Part of my duty as an auditor is to find fraud, waste, and abuse. Do you understand that?
Do you think fraud is a problem for business in general?
Do you think this company has any particular problem with fraud?
Has anyone ever asked you to do anything that you felt was illegal or unethical?
If you felt that there was a problem in the company with respect to fraud, what would you do?
Do you have any indication that there is fraud occurring in the company now?
How can you increase the perception of deception?
Forcing employees to take vacation time
Conducting surprise audits
employee anti-fraud education
job-rotation policies
requiring strong management oversight
What is a written ethics policy?
method by which management can communicate its philosophy an develop ethics program
for both new and old employees
can be shared with vendors, made public.
Starts with identifying key organisational characteristics and issues, such as:
Understanding why good people can commit unethical acts
Defining current—as well as desired—organizational values
Determining if organizational values have been properly communicated
Determining if ethics is currently a leadership issue in the organization
Ascertaining how board members, stockholders, management, employees, and any other pertinent members of the organization define success
Producing written ethics policies, procedures, or structures
What are some financial statement trends that are material?
Increasing expenses
Increasing cost of sales
Increasing receivables/decreasing cash
Increasing inventories
Increasing sales/decreasing cash
Increasing returns and allowances
Increasing sales discounts
What are some pressures to commit fraud?
Open-door management policies
Fair and equitably applied personnel policies and procedures
Measures to boost employee morale, such as career development opportunities, special events for employees, and recognition for jobs well done
Employee support programs, such as counseling for addiction, family and marital problems, and financial difficulties
What are the four factors that affect employees’ ethical decisions?
The law and other government regulations
Industry and organisational ethical codes (moral standards and accepted social behavior change over time).
Social Pressures (different groups within the same society may have conflicting ideas of right and wrong)
Tension between personal standards and organisational needs
How can you reinforce an anti-fraud culture?
Show employees that unethical behavior will not be tolerated
Create an environment in which employees feel safe challenging management decisions
visibly adhere to the same set of ethics policies that are required of all employees
What are the 12 components necessary to develop, implement and manage a comprehensive ethics program?
Focus on ethical leadership
Vision statement
Values statement
Code of ethics
Designated ethics official
Ethics task force or committee
Ethics communication strategy
Ethics training
Ethics help and fraud report telephone line
Ethical behavior rewards and sanctions
Comprehensive system to monitor and track ethics data
Periodic evaluation of ethics efforts and data
What topics should be covered in employee anti-fraud training?
What fraud is, including examples of what behavior is acceptable and what is not
How fraud hurts the organization
How fraud hurts employees
Common characteristics that lead individuals to commit fraud (i.e., pressure, opportunity, and ability to rationalize the act)
How to identify fraud (i.e., specific examples of financial, transactional, behavioral, and other red flags to watch for)
How to report fraud
The punishment for dishonest acts, including examples of past transgressions and how they were handled
