Blockchain has emerged as a driver of innovation in financial reporting, audit, and risk management. What are the implications of this technology for deterring and detecting financial reporting fraud? Drill down on this question and others in this article from Lucy Wang, CFE, Senior Technical Manager of Anti-Fraud at the Center for Audit Quality. The article, the second in the Collaboration’s series on emerging technology and fraud, is available here: https://www.thecaq.org/fraud-and-emerging-tech-blockchain/

Featuring a panel of top experts, this July 2018 webcast from the Anti-Fraud Collaboration explored the potential implications for fraud risk when it comes to the use of financial measures, presented outside the audited financial statements, that do not conform to US Generally Accepted Accounting Principles (GAAP).

Slides for this webcast are available here.

MODERATOR:
Cindy Fornelli, Center for Audit Quality, Executive Director

PANELISTS:
Phil Billington, HCA, Vice President, Internal Audit
Heather Dixon, AETNA, VP, Controller and Chief Accounting officer
Keith Higgins, Ropes & Gray LLP, Chair, Securities and Governance Practice
Serena I. Wolfe, Ernst & Young LLP, Partner

Sound corporate culture is a cornerstone of fraud deterrence and detection. This December 2017 webcast, hosted by the Anti-Fraud Collaboration, highlights leading practices on assessing and strengthening a company’s corporate culture. Hear from an expert panel, who share actionable recommendations that organizations can implement to deter fraud and misconduct. The panel also addresses oversight responsibilities of audit committee members, company management, and internal auditors. Expanding on insights contained in a 2017 National Association of Corporate Directors Blue Ribbon Commission report, Culture as a Corporate Asset, the webcast covers how culture impacts strategy, risk, and performance.

Slides for this webcast are available for download here.

MODERATOR:
Cindy Fornelli, Center for Audit Quality, Executive Director

PANELISTS:
Mark Carawan, Citigroup, Chief Compliance Officer
Brenda J. Gaines, Tenet Healthcare Corp., Audit Committee Chair
Gilly Lord, PwC, Head of Regulatory Affairs and Audit Strategy & Transformation
Paul L. Walker, St. John’s University, Schiro/Zurick Chair in Enterprise Risk Management

The risk of fraud should be considered when designing controls throughout financial and business processes. However, there are several reasons to look beyond the traditional approaches to preventing and detecting fraud, writes John Verver at the FEI Daily blog.

Recommendations for encouraging reporting of fraud, ensuring retaliation-free environment

WASHINGTON, DC (Nov. 15, 2017) – Organizations can take substantive actions to address the reporting of suspected financial fraud, according to a new report released by the Anti-Fraud Collaboration. Encouraging the Reporting of Misconduct presents recommendations from key players in the financial reporting supply chain – including corporate directors, financial executives, and internal and external auditors.

The Collaboration compiled best practices from roundtable discussions focused on suspected financial reporting fraud and the negative impact that fear of retaliation has on the timely detection of such fraud. By understanding the factors that discourage reporting, the Collaboration offers ways to counter such obstacles and makes recommendations for creating and maintaining a retaliation-free environment.

Formed in 2010 by the Center for Audit Quality (CAQ), Financial Executives International (FEI), The Institute of Internal Auditors (IIA) and the National Association of Corporate Directors (NACD), the Anti-Fraud Collaboration promotes the deterrence and detection of financial reporting fraud.

“The Anti-Fraud Collaboration is pleased to present these recommendations to help companies detect, report, and deter fraud,” Institute of Internal Auditors President and CEO Richard F. Chambers, CIA, QIAL, CGAP, CCSA, CRMA, said on behalf of the Anti-Fraud Collaboration. “No organization is immune to the risk of financial reporting fraud, but all companies can take necessary steps to mitigate such fraud, including encouraging employees to report misconduct, identifying the delinquency earlier in the process, and maintaining the integrity of financial reporting going forward.”

Commented CAQ Executive Director Cindy Fornelli, “Our hope is that the outcome of the roundtable discussions and report will serve as a catalyst for continued dialogue among financial reporting supply-chain participants, the investing public, and other interested parties. Those who observe misconduct should be encouraged to report their observations, and we hope that the report will provide concrete ways companies can provide a safe environment for them to do so.”

The roundtable discussions focused on key issues, including:

  • What organizations can do to encourage reporting of misconduct.
  • What creates fear of retaliation and what can be done to mitigate that fear.
  • What organizations and each participant in the financial reporting supply chain can do to cultivate a retaliation-free environment.

“Next to preventive measures, the best defensive tools leadership has to mitigate damage related to financial misconduct are the eyes and ears of their teams,” said Andrej Suskavcevic, president and CEO of FEI. “Establishing a corporate culture that respectfully embraces the reporting of perceived misconduct, together with proper and clearly communicated investigative procedures, can dramatically affect the willingness of staff to participate. Our research aims to help leadership meet those goals.”

Added Peter Gleason, president and CEO of NACD, “One of the most effective things boards of directors can do to promote a healthy working environment is to step up their oversight of company culture. That begins with encouraging management to define its unique culture and communicate it properly to all levels of an organization.”

The report is available for download on the Anti-Fraud Collaboration website.

Organizations can take substantive actions to address the reporting of suspected financial fraud, according to Encouraging the Reporting of Misconduct, a report from the Anti-Fraud Collaboration. The report presents key recommendations from key players in the financial reporting supply chain, including corporate directors, financial executives, and internal and external auditors. The Collaboration compiled best practices from roundtable discussions focused on suspected financial reporting fraud and the negative impact that fear of retaliation has on the timely detection of such fraud. By understanding the factors that discourage reporting, the Collaboration offers ways to counter such obstacles and makes recommendations for creating and maintaining a retaliation-free environment.

The LDC Cloud Systems Case Study is another installment in the Anti-Fraud Collaboration’s successful series of case studies. Participants in case study teachings start with a hypothetical scenario about a fictional company dealing with a fraud. Guided by an instructor, they then discuss what could have been done to address the situation.

Washington, DC – The Anti-Fraud Collaboration continues to promote diligence in financial fraud deterrence and detection with the latest installment of its series of case studies. The new case study features fictional company LDC Cloud Systems, a rapidly growing global technology company whose board must contend with a bribery allegation and accounting abnormalities.

“The Anti-Fraud Collaboration is pleased to present the latest case study in our series designed to raise awareness of financial reporting fraud,” said Center for Audit Quality Executive Director Cindy Fornelli, on behalf of the Collaboration. “These case studies have proven to be valuable educational tools for all members of the financial reporting supply chain, as well as students.”

With a plot centered on a bribery allegation and questionable accounting oversight within the company, this hypothetical scenario is designed to provide the reader a better appreciation of how fraud situations can unfold and be addressed, including the importance of strong board oversight. The LDC Cloud Systems case study explores actions of management and the board in-depth, providing a timeline of decisions after they uncover potential problems within the company. The case study also illustrates how complex accounting practices common in today’s fast-changing business environment can make a company susceptible to fraud.

For classroom use, the Anti-Fraud Collaboration created a video series to bring scenes from the case study to life. The videos are available at the Anti-Fraud Collaboration website.

“New technologies can make for a disruptive business environment, and can create new challenges on existing business practices,” said Andrej Suskavcevic, President and CEO of FEI. “Resources like this case study provide a practical tool to help financial executives explore issues that can help to deter financial reporting fraud.”

“For internal audit, this case study provides powerful insight into the challenges even highly competent functions face when confronting complex risks that are compounded by deceptive actions within a company,” said IIA President and CEO Richard F. Chambers, CIA, QIAL, CGAP, CCSA, CRMA. “It also shows the importance of being adequately resourced to address such risks.”

“Audit committees serve a critical role in ensuring the long-term value of their companies. This case study serves as a valuable resource to help audit committees think through their roles in providing oversight of their companies’ financial controls and communications,” said Peter Gleason, president and CEO of NACD.

Anti-Fraud Collaboration case studies take participants through a hypothetical scenario about a fictional company dealing with fraud. Guided by an instructor, the participants then discuss what could have been done to address or help avoid the situation. Each case study offers a companion discussion guide for instructors, available on request.

LDC Cloud Systems is the Collaboration’s fourth case study. Others include the following:

  • Hollate Manufacturing focuses on understanding the conditions that can generate and perpetuate fraud and misrepresentation in financial reporting.
  • Carolina Wilderness Outfitters is intended to facilitate a discussion about how to conduct an internal investigation when fraud is suspected in an organization.
  • Kendallville Bank focuses on the importance of exercising skepticism as a participant in the financial reporting process.

The Anti-Fraud Collaboration has developed six short video vignettes for use with the LDC Cloud Systems Case Study. In each vignette, actors reenact several interactions selected from the case study. The videos do not provide information beyond that found in the case. Rather, they aim to enable discussion participants to see certain material in a new light and allow the discussion leader to emphasize certain aspects of the case in the classroom.

Effective accounting policies and internal controls are key for stemming fraud and reducing the number of financial restatements. So how can companies improve in these two areas? Hosted by the Anti-Fraud Collaboration, this July 2017 webcast highlights leading-practice recommendations from top company executives, corporate directors, and auditors. The webcast also outlines the importance of creating accounting policies and controls, crafted through risk-based evaluations, that can be easily understood by non-accountants. Expanding on insights contained in a 2017 Anti-Fraud Collaboration report—Addressing Challenges for Highly Subjective and Complex Accounting Areas—the webcast’s panelists include experts from across the financial reporting supply chain. They discuss how successful companies utilize strong accounting policies to deter and detect fraud while providing actionable recommendations that each supply chain member can bring to their organizations.

MODERATOR

  • Cindy Fornelli, Executive Director, Center for Audit Quality

PANELISTS

  • Brian T. Croteau, Partner, PricewaterhouseCoopers LLP
  • Karl Erhardt, Executive Vice President and the Chief Auditor, MetLife
  • Suzanne Hopgood, President and CEO, The Hopgood Group
  • Linda Zukauckas, EVP and Corporate Controller, American Express