Question

In: Accounting

1. How do organizations fight fraud? 2. Why is the prevention of fraud important to organizations?...


1. How do organizations fight fraud?

2. Why is the prevention of fraud important to organizations?

3. Is the timeliness of fraud detection a business imperative? Why? Why not?

4.  Also, what is the cost to a company both financially and reputationally for failure to prevent and fight fraud

Solutions

Expert Solution

Fraud is a big problem for all type of organizations.

Types of Fraud
Fraud comes in many forms but can be broken down into three categories:

1.asset misappropriation

2.corruption

3.financial statement fraud.

We can minimize fraud occurrences by implementing different procedures and controls.

  1. Know Your Employees
  2. Make Employees Aware/Set Up Reporting System
  3. Implement Internal Controls
  4. Monitor Vacation Balances
  5. Hire Experts
  6. Live the Corporate Culture

To help businesses protect themselves from fraud, Hetherington offers the following tips for all companies:

  • Offer internal and external audits.
  • Create management reviews and independent audit committees.
  • Offer fraud training for management and employees.
  • Have mandatory vacation and job rotation.
  • Create a hotline/tip line and rewards for whistle blowers

Small businesses however, must be extra vigilant about fraud.

Hetherington offers the following tips to small businesses looking to prevent fraud.

  • Small companies seldom bother with a background check on new employees, potentially inviting hackers, predators and even convicted felons into the organization. Conduct a thorough background check that goes back over the past seven years on all employees before hiring to see if there is a criminal history.
  • With a signed release, check new employees' credit reports for any fiscal irresponsibility. During an economic crisis, it's OK to have some financial stresses, but you wouldn't want your comptroller to be filing for bankruptcy.
  • Once the employee is being considered for hire, review their social networks for any items damaging to reputation, especially any past animosity against their former employer.

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