Anti Fraud Programs and Controls (Deloitte)
What is Fraud?
The Public Company Accounting Oversight Board (PCAOB) defines fraud as “an intentional act that results in a material misstatement in financial statements that are the subject of an audit. Two types of misstatements relevant to the auditor’s consideration of fraud include: misstatements arising from fraudulent financial reporting and misstatements arising from misappropriation of assets.” There are additional types of fraud that should also be considered when designing and implementing antifraud programs and controls. These include improper or unauthorized expenditures, such as bribery, self-dealing and other improper payment schemes. Examples of this are kickbacks and violations of laws and regulations, such as those that expose the company or its agents to regulatory or criminal actions, e.g., violations of the Foreign Corrupt Practices Act, the False Claims Act, and the anti-money laundering provisions of the Patriot Act. Although these types of fraud may not have a material impact on the company’s financial statements, they may result in loss of company assets, reputation risk and increased exposure to criminal and/or civil liability. Effective antifraud programs and controls encompass a wide range of activities and policies, including corporate governance, compliance with laws and regulations, internal controls and training and education. Although many companies possess some components of an effective antifraud program, they may lack completeness, a comprehensive framework for assessment and evaluation, and adequate documentation. Deloitte & Touche LLP (Deloitte & Touche) and Deloitte Financial Advisory Services LLP (Deloitte FAS) work to assist management in designing, improving and implementing antifraud programs and controls. The firms also have the ability to coordinate services with the member firms and their affiliates of Deloitte Touche Tohmatsu outside the United States (the DTT...
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