Question

Recommendations: Based on the Bre-x gold scandal how to limit exposure to this type of fraud

Answer 1

BreX gold scandal, a well known company listed in 1990s regime on Toronto stock exchange announced massive and gigantic amounts of gold explored in an Indonesian mine owned by comoany which sent stock prices shoot from few cents to 286 Canadian Dollars in 1995.

However after consulting company Kilbert discovered that gold mined was impure and had very little or negligible amount of gold and thus was termed insignificant.

Such unethical practices can be avoided if companies adopt Sarbanes Oxley Act and an Ethical audit with strong corporate governance protocols where each activity related to production is tested and then subsequently press releases can be announced. Moreover CFO signs balance sheets and is responsible for all reported numbers. Risk management frameworks also mitigate risks related to exploration, mining, and extraction where third party auditors evaluate quality and genuinity of products been produced to avoid false claims amd financial fraud.