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them in understanding integrity issues. While companies or recruiters cant predict who might engage in fraud, they can limit
their exposure by enhancing the training of their highest executives on such important issues.
We find that the best anti-fraud strategy is creating an
integrity culture, Higgins says. Processes follow culture, not
the other way around. And culture is determined primarily by
the leaders attitudes and choices. Therefore, the integrity component must be an essential part of the equation in executive
search; it must be developed constantly at the individual and
executive team levels, and it must be rewarded as a requisite for
advancement and compensation. Otherwise an organization is
treating symptoms rather than causes.
PROACTIVELY ASSESSING FRAUD RISK AND
MONITORING CONTROLS
Execution of a robust fraud risk assessment is the first proactive
step management can undertake. The assessments purpose is
to identify and prioritize areas that pose a higher risk of fraud.
Keep in mind that individuals commit fraud, not IT systems or
business processes. Therefore, when executing a fraud risk assessment, management must understand the reasons people commit
fraud pressure, opportunity and rationalization as well as direct or indirect vulnerabilities.
The next proactive step is to identify and monitor internal
controls to mitigate the risks. Action plans should be developed
to document and evaluate the controls that mitigate any fraud
risks found during the assessment. These plans should specify
wholl be responsible for monitoring and testing the controls,
and wholl review the results of their work.
BEING PREPARED TO REACT TO FRAUD AND
DEFINING ROLES AND RESPONSIBILITIES
Of course, fraud will still occur even though management sets
the proper tone, trains their people on spotting problems, executes a robust fraud risk assessment, and designs internal controls
to prevent and detect fraud. Therefore, the anti-fraud team has
to establish reactive elements for the anti-fraud program.
The cornerstone of any reactive element in an anti-fraud
program is a timely response to the suspected fraud with the right
team. The team should establish, review, approve, and maintain
policies and procedures regarding the companys responses to
fraudulent activities. The fraud response plan should encompass
investigations, remediation and uniform disciplinary processes.
The team also should establish an investigation protocols
framework for management. The protocols should state that all
suspected frauds, regardless of sources, will be reviewed and investigated. The team will determine wholl lead the investigations if
external assistance is needed, such as outside forensic assistance
with fraud experience, and the results of the investigations will
be communicated to the audit committee in a timely manner.
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