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Chapter 4: Preventing Fraud (Current model of fraud (Fraud incident, Fraud…
Chapter 4: Preventing Fraud
Low fraud environment
Culture of honesty, openness, and assistance
(1) Hire honest people and give fraud awareness training
25% of all fraud committed by employees 3 years or younger
Good screening policies and practices
Verify all info
Thorough interviews
(2) Create positive work environment
Expectations about honesty
Code of conduct
Open door or easy access policies
People less likely to commit fraud if have someone to talk to
Allows managers to be aware of employee's problems
Positive personnel and operating procedures
(3) Have employee assistance program to help with personal pressures
Include programs and services for wellness, team building, conflict resolution, counseling, critical incident response
Get rid of opportunities for fraud and punish it when it occurs
Good internal controls
Good control environment
Sets tone of org./ Is the foundation for all
Good accounting system
Proper accounting information
Good control activities
Policies and practices such as segregation of duties, System of authorization, Physical safeguards, Independent Check, and Document and records
Monitoring
Good communication and information
Informing people of policies against fraud
Monitoring employees and having whistle-blowing system
Four reasons why it fails: lack of anonymity, culture of org., policies, and lack of awareness
Must have anonymity, Independence, accessibility, and follow-up
Create expectation of punishment
Proactive auditing
Must identify fraud risk exposures, identify fraud symptoms of each exposure, build programs to actively look for both, and investigate symptoms
Current model of fraud
Fraud incident
Fraud investigation
Action taken against fraud
Resolution of fraud