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:
Led by an expert panel, this program highlights leading practices on assessing and strengthening a company's corporate culture, including how culture impacts strategy, risk, and performance. Sound corporate culture is a cornerstone of fraud deterrence and detection....
While short-termism is a sizable challenge, so too is the commitment to understanding why this is such an entrenched business practice, and how we can mitigate its harmful effects. The Anti-Fraud Collaboration hosted a webcast, “Coming to Terms with Short-Termism”, to...
The goals that a company’s investors may have for long-term value creation may come into conflict with incentives that are introduced by short-term pressures, with examples including analysts’ expectations, internal profit targets, and compensation bonuses tied to...
Financial fraud reporting continues to be a major focus of both the public and private sectors. Participants across the financial reporting supply chain are also active in detecting and deterring fraud. The Anti-Fraud Collaboration continues to develop communication,...
The phrase “organizational culture” can mean different things, but can greatly influence the long-term success of an organization. By emphasizing the need to improve and maintain an ethical culture, executives can avoid corporate scandals while enhancing morale....
This webinar explores the emerging trend of using data analytics to detect and deter fraud. A panel of experts discusses the foundations of data analytics and how companies can utilize analytics within their own organization. Webinar participants will be given an...