Studies show that organizations that encourage ethical behavior are more resistant to misconduct of all kinds, including financial reporting fraud. A strong ethical culture hedges against all three sides of the fraud triangle – pressure, opportunity, and rationalization. In an ethical culture, pressure to commit fraud is counteracted through sound risk management strategies and appropriate incentives. It will support well-designed controls that reduce opportunities for fraud and increase the likelihood of early detection. A culture of honesty limits an individual’s ability to rationalize fraudulent actions.
Management is primarily responsible for an organization’s culture, and together with the board of directors, sets the “tone at the top” by communicating and visibly adhering to clear ethical principles and codes of conduct and by providing necessary support and resources for robust fraud risk management programs and internal controls.
Another vital ingredient in an ethical culture is skepticism. Management should encourage employees to not only feel comfortable but obliged to question and challenge the results for which they are responsible.
The Anti-Fraud Collaboration produces resources aimed at helping corporations nurture cultures that help deter and detect fraud and equips all stakeholders within the financial reporting supply chain with the tools they need to fight fraud.
Take a look at our corporate culture resources below:
Fighting financial fraud is a shared responsibility that requires vigilance from all members of the financial reporting ecosystem, including public company management, the audit committee, and internal and external auditors. Every member has unique skills that can be...
The Anti-Fraud Collaboration has developed a successful series of case studies centered around hypothetical fraud scenarios. Each case study starts with a set of facts about a fictional company, and through the case, members of the financial reporting supply chain and...
Margot Cella, Vice President, Research and Anti-Fraud Initiatives at the CAQ sits down with Stephen Rivera, Vice President, Global Technical Accounting Advisory Services & Policy at Johnson & Johnson on this episode of Anti-Fraud in Action, to discuss ethical...
The COVID-19 pandemic has resulted in unprecedented social and economic paralysis. Most companies have transitioned to an entirely remote workforce, and while existing technologies have facilitated connectivity via cloud computing and video and teleconferencing...
When a corporate scandal occurs and stakeholders seek reasons and root causes, the trail often leads back to problems with the organization’s culture. But what if an organization could get ahead of those crises? Many companies have begun to understand that tracking...
Bringing together qualitative and quantitative data that exists within successful organizations. Setting the right tone at the top of an organization is something that leaders take very seriously. Stakeholders who have a role in the financial reporting ecosystem are...