Organizational Fraud

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ORGANIZATIONAL FRAUD

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Submitted by:
Amit Goel(amigoel@gmail.com)
Mohit Goel

Executive Summary

For many organizations, “getting it right” or “getting it wrong” is a matter of survival. This study talks about the issues like, ‘organisational fraud’, ‘ethics’ & ‘empowerment’ in an organisation and their relation to standards of good behaviour in order to explore various ways in which occurrences of ever increasing frauds can be checked. Organisational Fraud can be perpetrated by those outside an organization (“third parties”), by employees, or through the collusion of employees and third parties. Numerous surveys in recent years have reported that the majority of fraudsters are employees, with more than half of these being from management grades.

With just one fraud Blue Chips turns into potato chips!!!!!

While saluting the rags to riches (and now riches to rags?) stories of organizations, we must also remember that for a Public Ltd Co., the stakeholders interests are foremost, not just shareholders. There must be more transparency between the management and employees and also the clients and the general public. Something of this sort happened with Enron and its Auditing firm "Arthur Anderson", now Accenture. They used to say ' you can teach Accountancy to an honest person but not honesty to an (dishonest) Accountant'.

"You can fool some of the people all the time; All the people for some of the time but not all the people all the time[1]" - how true!!!!! Table of Contents
1. INTRODUCTION7

2.OBJECTIVES OF STUDY8

3.DEFINING FRAUD8

3.1 Types of fraud8

3.2 Legal Elements of Fraud9

3.3 How big is the problem?10

3.4 Who are the perpetrators?10

3.5 Why do people commit organizational fraud?11

3.5.1Motivation11

3.5.2Opportunity11

3.5.3Rationalization11

3.6 Red Flags of Organizational Frauds11

3.6.1. Structural red flags11

3.6.2. Personnel red flags12

3.6.3. Operational red flags12

3.6.4. Accounting system red flags12

3.6.5. Financial performance red flags12

4. ESSENTIALS OF ORGANIZATIONAL FRAUD12

4.1Detection13

5. SATYAM SCANDAL14

5.1 Lessons for HR Professionals14

5.2 Lessons for India Companies15

6. ORGANISATIONAL EMPOWERMENT16

7. RISK OF FRAUD IS LESSENED IN EMPOWERED ORGANIZATION16

8. IMPACT OF FRAUD16

8.1 Macroview – Impact on Organization16

8.2 Microview – Impact on employees not involved in fraud17

9. ORGANIZATIONAL LEADERSHIP17

10. FUNDAMENTAL PRINCIPLE OF ORGANIZATIONAL GOVERNANCE18

11. FRAMEWORK OF GOOD ORGANIZATIONAL GOVERNANCE18

12. WHAT CAN ORGANIZATIONAL GOVERNANCE DO?19

13. COMMON SENSE APPROACH TO EFFECTIVE ORGANIZATIONAL GOVERNANCE20

14. ISSUES OF ETHICS AND MORALITY20

15. ORGANIZATIONAL LEADERSHIP AND CULTURE20

15.1 Organizational Fraud Triangle21

15.2 Lessons for Managers23

16. HOW TO PREVENT FRAUDS23

17. ROLE OF HR IN REDUCING ORGANIZATIONAL FRAUDS25

18. CONCLUSION26

REFERENCES27

ANNEXUREi

LIST OF ABBREVIATIONS

|FBI |Federal Bureau of Investigation | |KPMG |Klynveld Peat Marwick Goerdeler | |OF |Organizational Frauds | |USA |United States of America | | | | | | | | |...
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