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:
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...
Sound corporate culture is a cornerstone of fraud deterrence and detection. This webcast, hosted by the Anti-Fraud Collaboration, highlights best practices on assessing and strengthening a company’s corporate culture. An expert panel shares actionable recommendations...
When fraud is identified or suspected in an organization, companies and their boards are not always aware of what steps to take. The SEC’s Division of Enforcement formal Cooperation Program includes various measures designed to encourage individuals and companies to...
Misconduct by any employee can potentially ruin any organization. Management typically institutes a variety of processes to minimize this risk and analyze and address any alleged transgressions. In an effort to better understand the factors that impede the reporting...
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...