CJR-334-Z1 Economic Crime Investigation
October 29, 2012
Fraud Prevention and Management Recommendations
The purpose of this Fraud Prevention Plan is to set out the approach to dealing with fraud risk within our organization. In order to prevent the types of frauds that have already occurred within our organization it will be necessary to create “a culture of honesty, openness, and assistance…..fraud prevention is where the big savings occur” (Albrecht, Albrecht, Albrecht, & Zimbelman, 2012, p.103). What is required is the implementation of a comprehensive hiring, fraud, and ethics training program with strong controls, with punitive treatment of fraud offenders. “Research confirms that anyone can commit fraud. Fraud perpetrators usually can’t be distinguished from other people on the basis of demographic or psychological characteristics.” (Albrecht et al. 2012, p. 33). The value of an effective fraud prevention program requires several components. The lack of fraud prevention leads to enormous risk.
The corporation will need to install processes and controls to ensure that honest people are hired. When candidates are going through our interview process they will need to be thoroughly vetted on the accuracy of their work history, education, and stated accomplishments. In addition to the standard practiced of contacting references provided by the candidate, these referenced individuals will be asked to provide additional references. The result of checking references provided by the initial reference will in many instances allow for greater insight into the true character of the candidate.
The Director of Human Resources should investigate the potential of having a pre-employment Business Ethics Assessment completed and evaluated for each potential new employee. The assessment will measure each candidate for knowledge of the application of ethical principles in various workplace situations, such as whistle-blowing, conflicts of interest, policies, ethical issues, and honesty (SHL Global, 2012). Consistent use of such assessments pre-hire will enable the firm to hire the most honest people. Criminal and credit history background checks are a critical component to our proposed fraud prevention plan, enabling the firm to identify “high risk” individuals prior to extending an offer of employment.
In addition to stringent hiring practices the corporation will institute a fraud awareness training program for all employees as part of our efforts to create a “low-fraud atmosphere”. (Albrecht et. al. 2012, p. 103). Senior management must establish a positive work environment by creating a formal code of conduct that sets the expectation for high ethics, stating what is and is not acceptable within our enterprise. Section 406 of the Sarbanes-Oxley Act of 2002 is a “Code of Ethics for Senior Financial Officers” that requires that every public company to create, disseminate to all employees, and religiously enforce its ethical code (Albrecht et. al. 2012, p. 107). Ideally the Code of Ethics should be reviewed and signed by all employees on an annual basis. Albrecht et al. (2012, p.106) provides an example of a company issuing small cards to every employee to carry on their person. The card lists several reporting options for employees who suspect fraud is taking place. One of the options to report suspected fraud is for employees to contact an external, anonymous ‘hotline’ to communicate their suspicions. These actions combined with regular messages on fraud awareness and non-tolerance will help to decrease our incidents of fraud loss.
Executive and mid-level managers need to create and preserve an open-door policy as an important element to assist in our fraud avoidance program. Easy access (open door) policies prevent fraud and allow managers to become aware of employee pressures and their possible rationalizations that contribute to...