Question

Assume that you are the fraud expert for a large Fortune 500 company. In a recent meeting with the executive committee, one of the officers explains that the fraud prevention program, which teaches managers and employees how to detect and report fraud, costs the company $150,000 a year. The officer then explains that it is a waste of time and money for the company to educate employees and managers about fraud. “Isn’t it the responsibility of the auditors to detect fraud?” he questions. As the fraud expert of the company, you are asked by the president to explain why managers and employees should be educated in the detection of fraud.

Prepare a detailed response to the following questions regarding the scenario above, incorporating information learned from the Fighting Fraud case study. Be sure to prepare in well-developed paragraphs (do not use a question-answer format).

• What would you tell the committee about why it is important to train managers and employees in fraud detection?
• After you have explained to the committee why it is important to train management and employees, the president asks you about effective ways to involve employees and managers in the prevention and detection of fraud. What would you tell the president?
• What could be an effective means of deterrence in the organization?

Requirements:

• Write a paper of 4-6 pages in length (double-spaced), not counting the title and reference pages, which you must include.

Answer 1

1. In a competitive business environment, it is imperative for any organisation to have a vigil to ensure that its competitive position is maintained and continuous trust should to there to improve upon its business so as to earn name, fame and in turn profit. Every organisation operates in an environment that is subject to constant change. Hence, unless an organisation adapts itself to the changing environment, success can not be guaranteed. So it very much necessary for introspection into the organisation’s

1. Strengths,
2. Weakness,
3. Opportunities,
4. Threats.

Basically in every organisation training of managers and employees is the most important factor which are required to be implemented in every level whether it is for fraud detection, whether it is for understanding the goal and achievement of the organisation, whether it is for how to develop one’s own skill, whether it is for sharing of information among employees etc. in all areas for improvement as well as in order to have a good control over the business and for growth in totality.

Fraud can happen in all areas of the activities while discharging the duties by the managers and employees it cannot be limited to an only few areas. Auditors normally provide their expertise in helping to find the out fraud but it also cannot be guaranteed that after their auditing as well after providing solution to the area of improvement fraud has been eliminated. The reason being the fraud can happen when an employee becomes knowledgeable in his area work and when he becomes expert in delivering the out in various methods which looks to be very lucrative but may be far away from reaching the desired goal in near future and the auditor who is auditing his deliverables if not matured and do not have in depth knowledge and practical exposure in that area, it will be very difficult for him to find the twist which that employee has made which may lead to financial loss to the company in near future and it may help other competitor to take advantage arising out of it or it may so happen that due nexus with the other company he has made that fraud due to the reason mentioned above.

It is always better to depend on the employees and who will gradually develop a sense on how fraud happens and how to avoid it. By doing so they will become aware as to how to discharge their duty so that they will able to understand the occurrence of the same and become more vigilant while adopting the new method proposed by his senior or colleague and definitely they will be hesitant in application of the same in their work and even they will try to oppose it. By doing so dependency on the employee will be more and also it will become easier for auditor to give their report on the findings as well as on the possible improvement of the same which will surely yield positive results in the overall performance of the organisation due to which financial performance will also increase.

So only auditor will only be responsible for finding out the fraud will not help until and unless managers and managers are made aware of the fraud detection and prevention of it. In order to achieve this goal, it is a must for an organisation to train managers and employees in fraud detection which in turn will help to find out the organisation’s strengths, weakness, opportunities and threats.

The effective training programme on regular basis will help the managers and employees from their very initial stage to understand about the fraud, keeping a vigil on the system in place so that they will become alert while taking crucial decision which in turn will save lot of money. This will help the organisation to become more transparent in its day to day activity and all employee will always try to prevent also for possible occurrence of the same even if it is required they will refrain themselves from taking such actions which might be they will be directed to take.

2. The effective ways to involve employees and managers in the prevention and detection of fraud are

1. Develop a system of reporting among the employee.
2. Develop a system of sharing of information among the employee.
3. Develop a system of reporting about the possible happening of fraud.
4. Develop a system to whom the fraud should be reported.
5. Develop a system as to who it should be reported.
6. Develop a system of maintaining confidentiality about the managers and employees who are intimating about the fraud to the higher management.
7. Develop a system of awarding the employee by promotion.
8. Develop a system of giving incentive to the employee.
1. Develop a system of where if it is found that the employee has inadvertently made a mistake which can be treated as fraud, he should be given an opportunity for further improvement rather than taking strict action to them.
10. Very congenial atmosphere should be developed among the managers and the employee.

3.

The effective means of deterrence in the organization will be as follows:

1. Implementation of an effective training system for fraud detection.
2. Implemented training system should be evaluated in a time bound manner and if required it be improved as required.
3. Regular making aware of the people about the need of the training programme
4. The training should be imparted in such a manner that people should be encouraged in proving the complex problems
5. Proper communication system should be developed
6. Proper reporting system should be implemented
7. In case of the fraud the details should be brought to the notice of the employees and action taken for it
8. Assurance should be given about the maintain the confidentiality.
9. Award system etc