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:
All publicly traded companies are required to have a whistleblower program - a process whereby employees can report occupational misconduct. But how can you know if your company has an effective program? And how do you build awareness throughout your company. This...
The Audit Committee Annual Evaluation of the External Auditor helps audit committees perform the annual evaluation of the auditor. This evaluation tool is scalable and specifically includes a detailed look into the auditor’s independence, objectivity, and professional...
An ethical culture doesn’t just happen overnight, it takes diligence and hard work. Each of the key stakeholders in the financial reporting supply chain plays an important part. In this webcast, hear how successful organizations leverage their resources to reinforce...
Financial reporting fraud undermines investor confidence and can destroy shareholder value. The impact of uncovering fraud often extends well beyond monetary losses and can lead to unwanted media attention, reputational risks, and can shake the confidence in the...
The Hollate Manufacturing Case Study examines a potential material fraud at a fictional manufacturing company to raise awareness of environments in which financial reporting fraud might flourish. The case study is accompanied by a discussion guide that provides a...
Corporate culture is the key for any company’s governance structure. If the culture is weak, then the likelihood of financial reporting fraud increases. This program gives actionable recommendations for what management, boards and audit committees, as well as internal...