Exploring Antifraud Policies, Programs, and Procedures

Companies of all sizes are susceptible to employee fraud including embezzlements, thefts, and misappropriations of assets as well as Financial Reporting Fraud (FRF), also known as “cooking the books”, in order to show a rosy picture of the company so that it appears more attractive to investors than it really is. The 2016 Association of Certified Fraud Examiners (ACFE) Report to the Nations reveals that the “typical organization loses 5% of revenues in a given year as a result of fraud, which exceeded $6.3 billion, with an average loss per case of $2.7 million”.

This can occur in situations where there are unexplained accounting anomalies, unusually rapid revenue or profit growth, weak internal controls, and aggressive financial actions by senior management, among other things. The existence and persistence of FRF has undermined the integrity and reliability of public financial information, eroded investor confidence, and has had detrimental effects on the safety, soundness, and efficiency of financial markets worldwide. The very viability of the business as well as the safety of financial markets in general are threatened when the existence and persistence of FRF go undetected.

Financial reporting fraud can be detected with effective corporate governance, which includes effective antifraud policies and programs by the board of directors, management, and auditors. Effective antifraud programs, —focusing on fraud awareness and education in the workplace environment, whistle-blowing policies and procedures of encouraging employees to report suspicious behavior without fear of reprisals, adequate internal control procedures designed to prevent and detect fraud, and conducting surprise audits—are all examples of actions that the board of directors, management, and other corporate gatekeepers can take to significantly reduce FRF.

Please join Zabihollah (Zabi) Rezaee, noted educator, author, and speaker as he discusses how antifraud policies, programs, and procedures should be designed to deter, prevent, and detect financial reporting fraud. Dr. Rezaee offers insights concerning the role of ethics and corporate governance in forensic accounting education and practice, including a discussion of corporate culture, control structure, and fraud procedures designed to detect financial reporting fraud before irreparable damage has been done.