Report Helps Build Fraud Resistant Organizations

Identity Theft & Fraud Blogs

Written By ESR News Blog Editor Thomas Ahearn

Just in time for International Fraud Awareness Week, which runs from November 16 to 22, a report from The Anti-Fraud Collaboration – ‘The Fraud-Resistant Organization: Tools, Traits, and Techniques to Deter and Detect Financial Reporting Fraud’ – provides information on how financial organizations can become less susceptible to fraud. The 56-page report is available at http://www.thecaq.org/docs/anti-fraud-collaboration-report/the-fraud-resistant-organization.pdf.

The Anti-Fraud Collaboration was formed by the Center for Audit Quality (CAQ), Financial Executives International (FEI), The Institute of Internal Auditors (The IIA), and the National Association of Corporate Directors (NACD). The four organizations represent members of the financial reporting supply chain that includes external auditors, company financial management, internal auditors, and audit committees. To learn more, visit www.antifraudcollaboration.org.

“All players in the financial reporting supply chain must work together to deter and detect financial reporting fraud,” CAQ Executive Director and Anti-Fraud Collaboration Co-Chair Cindy Fornelli stated in a press release about the report. “The report highlights vital roles and responsibilities and provides each party with knowledge they can use to reduce the potential for fraud.”

The Anti-Fraud Collaboration report focuses on financial reporting fraud at publicly traded companies and defines financial reporting fraud as “a material misrepresentation resulting from an intentional failure to report financial information in accordance with generally accepted accounting principles.” The report examines factors that make some financial organizations more susceptible to fraud. The following three themes emerge at these organizations:

  • Lack of a strong “tone at the top” and an ethical culture.
  • Insufficient skepticism on the part of participants in the financial reporting supply chain.
  • Insufficient communication among financial reporting supply chain participants.

The report also includes research on the qualities and techniques of more fraud resistant organizations. The following three themes emerge at these organizations:

  • A tone at the top that encourages an ethical culture.
  • The presence of skepticism.
  • The engagement of all participants in the financial reporting supply chain, with all relevant parties understanding and effectively performing their roles with respect to the company’s financial reporting.

The Anti-Fraud Collaboration report also addresses challenges with fraud deterrence and detection that multi-national financial companies face in a global economy and markets that include different languages, cultures, and regulatory requirements. The ‘Fraud-Resistant Organization’ report is available here.

Financial reporting fraud accounts for a median loss of $1 million, according to the ‘2014 Report to the Nations on Occupational Fraud and Abuse’ by the Association of Certified Fraud Examiners (ACFE). The ACFE report also estimated that the typical organization loses 5% of revenues each year to fraud which translates to a potential projected global fraud loss of nearly $3.7 trillion. To view the ACFE report, visit www.acfe.com/rttn.aspx.

Sponsored by the ACFE, International Fraud Awareness Week is dedicated to fraud awareness, detection, and prevention and is a global effort to minimize the impact of fraud by promoting anti-fraud awareness and education. For more information about International Fraud Awareness Week – including Fraud Week resources, presentations, anti-fraud tools, and steps to combat fraud – visit http://www.fraudweek.com/.

More Information About Fraud

For more information about fraud from Employment Screening Resources® (ESR) – ‘The Background Check Authority®’ – read the ESR News Blogs at http://www.esrcheck.com/wordpress/tag/fraud/.