The Anti-Fraud Collaboration is pleased to send you the second issue of our newsletter that includes updates on the various resources and programs we developed in Q3 2020.
Our new report, Skepticism in Practice, explores the importance of more critically assessing the potential for fraud and examining certain biases that can leave organizations vulnerable to deceptive activities and misconduct. The report provides tools and techniques needed to shift organizations toward a better balance between trust and skepticism as it relates to fraud and other important considerations.
Missed a webisode? Watch the entire series here.
CAQ’s Senior Manager of Anti-Fraud Initiatives, Lucy Wang, and Professional Practice Fellow, Yuri Zwick, participated in two IAASB-facilitated roundtable discussions that focused on:
Interested in learning more? Click on the topics to view the discussions, and send us your questions or comments.
The Anti-Fraud Collaboration’s webcasts on corporate culture are now available as free CPE self-study courses from the AICPA.
The Anti-Fraud Collaboration (AFC) is pleased to share our inaugural issue of a new quarterly newsletter that will provide updates on the various resources and programs developed by the Collaboration members.
New Anti-Fraud in Action Webisode: A Focus on Ethical Culture and Diversity During Crisis
The first webisode in our Anti-Fraud in Action series features a discussion between Stephen Rivera, Johnson & Johnson VP of Global Technical Accounting Advisory Services & Policy, and Margot Cella, CAQ VP of Research and Anti-Fraud Initiatives, on the issues facing public companies during the COVID-19 pandemic. Rivera shares insights on leveraging a strong, ethical culture and the importance of diversity and inclusion during a critical time in crisis.
Watch the Interview with Deloitte’s Forensic Partner on Mitigating Fraud Risk in Times of Uncertainty:
On April 24, the CAQ presented at Ethic and Compliance Initiative’s (ECI) IMPACT 2020 virtual conference, featuring Deloitte Forensic Advisory Partner, Holly Tucker, and CAQ VP of Research and Anti-Fraud Initiatives, Margot Cella. The session highlighted the heightened fraud risk during the COVID-19 crisis with a focus on implications of the CAREs Act and types of potential frauds. Tucker also emphasized that companies should expect a lag time of three months to a year for detecting a fraud from when it might occur. Watch clips from the interview here.
For more on this topic, read the CAQ resource Managing Fraud Risk, Culture, and Skepticism During COVID-19
More COVID-19 Resource Exchanges:
Stay current on the how the COVID-19 crisis is impacting the financial reporting supply chain. The AFC members are developing new COVID-19 resources to keep you informed.
“Building on the Anti-Fraud Collaboration’s decade-long efforts to raise awareness of the influence of corporate culture on conduct, this white paper emphasizes the efficacy of regular assessment in deterring and detecting those elements of culture that can serve as a breeding ground for misconduct,” said CAQ Executive Director, Julie Bell Lindsay.
In Assessing Corporate Culture: A Proactive Approach to Deter Misconduct, the AFC shares insights into the importance of assessing culture as well as considerations for the ownership of the culture assessment process.
This topic is further explored in a complementary AFC webcast, A New Focus on Corporate Culture: How to Assess Culture and Why, which highlights leading practices that bring together qualitative and quantitative data that exist within an organization, coupled with key information that companies should collect and monitor to contribute to a robust culture assessment.
In 2020, the AFC launched a content series that explores the effectiveness of fraud deterrence and detection enhanced by emerging technology. The series also provides insights into how digital transformation is impacting the financial reporting process and its supply chain members—i.e., internal and external auditors, board and audit committee members, preparers, and financial executives.
Stay tuned for our next quarterly update! Below is a sneak peak of key topics and developing resources from the AFC.
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Washington, DC – When corporate scandals occur, the root cause can often be traced back to an organization’s weak ethical culture. According to a new white paper from the Anti-Fraud Collaboration, implementing robust and regular assessments of corporate culture can help to deter and detect fraud, enabling leadership to take proactive steps to address problems before they result in scandal.
Entitled Assessing Corporate Culture: A Proactive Approach to Deter Misconduct, the white paper is the latest resource to assist organizations in the deterrence and detection of financial reporting fraud and other misconduct, prepared by the Anti-Fraud Collaboration: the Center for Audit Quality (CAQ), Financial Executives International (FEI), the National Association of Corporate Directors (NACD), and The Institute of Internal Auditors (The IIA). It recommends approaches to help companies conduct regular assessments of the state of their culture, including culture dashboards, orientation processes, employee information gathering, incentives, problem identification, and proactive listening.
“Building on the Anti-Fraud Collaboration’s decade-long efforts to raise awareness of the influence of corporate culture on conduct, this white paper emphasizes the efficacy of regular assessment in deterring and detecting those elements of culture that can serve as a breeding ground for misconduct,” said CAQ Executive Director Julie Bell Lindsay. “With the practical monitoring outlined here, corporate culture can be a valuable asset in reinforcing desired behaviors, mitigating risk, and maintaining marketplace and shareholder confidence.”
In addition to exploring the importance of organizational culture, the white paper defines roles and responsibilities for maintaining and influencing culture, which typically falls to boards of directors and senior management.
“It is well established that companies with strong, ethical cultures can better resist fraud,” added Andrej Suskavcevic, FEI President and CEO. “FEI urges company leaders in the finance function and beyond to consult this publication to guard against financial fraud.”
“The findings in this report expertly synthesize a variety of strategies and materials to aid directors in assessing its own culture,” said Peter Gleason, NACD president and CEO.
The Anti-Fraud Collaboration also emphasizes the risk factors and considerations for both external and internal auditors, who monitor and evaluate culture as part of the audit process.
“Maintaining a healthy corporate culture is a complex task, requiring sustained effort on multiple levels,” said The IIA President and CEO Richard F. Chambers, CIA, QIAL, CGAP, CCSA, CRMA. “By taking a closer look at the process of culture assessment, this new resource from the Anti-Fraud Collaboration will help internal auditors and others address that complexity.”
For more on assessing corporate culture, watch the Anti-Fraud Collaboration’s December 2019 webcast on the topic.
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About the Anti-Fraud Collaboration
The Anti-Fraud Collaboration represents the collaborative efforts of the Center for Audit Quality, Financial Executives International, the National Association of Corporate Directors, and The Institute of Internal Auditors, organizations that actively engage in efforts to mitigate the risks of financial reporting fraud. The Collaboration’s goal is to promote the deterrence and detection of financial reporting fraud through the development of thought leadership, awareness programs, educational opportunities, and other related resources specifically targeted to the roles and responsibilities of participants across the financial reporting supply chain.
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:
“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.
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:
Washington, DC – Improved accounting policies and internal controls are key for stemming fraud and reducing the number of financial restatements, according to a new report from the Anti-Fraud Collaboration. The report, Addressing Challenges for Highly Subjective and Complex Accounting Areas, compiles leading-practice recommendations from dozens of company executives, corporate directors, auditors, and regulators who attended two 2016 workshops to discuss ways to help deter fraud and enhance financial reporting.
“Companies are sharing leading practices and voluntarily working with regulators to help deter and detect financial reporting fraud,” said Cindy Fornelli, executive director of the Center for Audit Quality (CAQ), on behalf of the Anti-Fraud Collaboration. “The Anti-Fraud Collaboration is pleased to present these recommendations to help companies improve their accounting policies and system of internal controls. Investors, our capital markets, and public companies all win when we work together to combat fraud.”
The Anti-Fraud Collaboration held workshops in New York and San Francisco that brought together members of the financial reporting supply chain, including regulators, audit committee members, financial executives, internal auditors, and external auditors.
The workshops explored issues that were identified in an analysis of enforcement actions in which the U.S. Securities and Exchange Commission (SEC) took an action against an issuer or individual because of a securities violation and asserted that there were serious issues with the companies’ internal controls. The workshops also examined case studies as a catalyst for the discussions.
The report makes key recommendations concerning company accounting policies:
The report also outlines key recommendations regarding internal control over financial reporting (ICFR):
“Our members are highly committed to the deterrence and detection of fraud and are focused on their responsibility toward that effort, which includes overseeing the preparation of accurate financial information and the importance of designing, monitoring, and maintaining effective internal control over financial reporting,” said Andrej Suskavcevic, CAE, president and CEO, Financial Executives International (FEI). “We fully support the efforts of the SEC to promote cooperation and self-reporting.”
“Successfully battling fraud in financial reporting requires strong collaboration among all the principal players,” said Institute of Internal Auditors (IIA) President and CEO Richard F. Chambers, CIA, QIAL, CGAP, CCSA, CRMA. “This report is built on such collaboration and offers valuable direction and insight on improving accounting policies and internal control over financial reporting.”
“The sharing of leading governance practices is an essential element of effective board leadership,” said National Association of Corporate Directors (NACD) President and CEO Peter Gleason. “While this report is an important guide for all corporate directors, it will be especially of interest to our public company audit committee members.”
Coming to Terms with Short-Termism: Implications for Fraud
Date: Thursday, July 7, 2016
Time: 1:00 p.m.– 2:30 p.m. (EDT)
Goals for long-term value creation for a company’s investors may conflict with incentives that are introduced by short-term pressures, such as analysts’ expectations, internal profit targets, and compensation bonuses tied to short-term performance metrics. Emphasis on short-term results can increase the risk of financial reporting fraud if there isn’t alignment between the short-term goals and the long-term strategy. Organizations may not fully appreciate the long-term impact that the need to meet or beat short-term expectations—from the Street, or even from a supervisor or business unit leader—has on the actions that employees take. And employees may not fully realize the implications to the long-term strategy of the decisions they make when they give in to those pressures.
Learn how audit committees, financial executives, and internal auditors can help to improve the connection and identify ways to mitigate the risks of short-termism, and how the external auditors factor those risks into their audit planning and scoping. Our panel of experts will discuss what successful companies do to reinforce the alignment between potentially conflicting goals, and provide actionable recommendations that each supply chain member can implement in their organizations.
We encourage all of the key players in the financial reporting supply chain—audit committees, financial executives, internal auditors, and external auditors—as well as compliance professionals, to register for this informative program.
The Conference Board Governance Center
Senior Managing Director
Brock Capital Group
Executive Consulting Group
Center for Audit Quality
The Anti-Fraud Collaboration offers a wide range of free CPE self-study online courses. These courses are currently in the process of being updated to meet new policy requirements. Visit this page in Fall 2020 for new free CPE courses.
Date: Tuesday, October 27, 2015
Time: 2:00–4:00 p.m. (EDT)
An emerging trend is the use of data analytics to detect and deter fraud. Data is the most robust asset an organization maintains. How can it be used to help companies pinpoint and identify manipulations? Join a panel of experts as they discuss the foundations of data analytics and how companies can implement analytics within their own organization. The webinar also will explore how companies can move from ad hoc analyses to more proactive continuous detection using advanced tools. And finally, the webinar will provide participants with an action plan for what they can do today to prepare to use data analytics to deter and detect fraud.
We encourage all of the key players in the financial reporting supply chain—audit committee members, financial executives, internal auditors, and external auditors—as well as compliance professionals, to register for this informative program.
This program is FREE of charge and eligible for 2 CPE Specialized Knowledge and Application credits.
The webinar will be archived on the Videos page of the Anti-Fraud Collaboration’s website for those unable to participate during the live broadcast.
Data Analytics to Deter and Detect Fraud
Date: October 27, 2015
Time: 2:00–4:00 p.m. (EDT)
Chief Operating Officer
Financial Executives Research Foundation
Director, Forensics and Valuation Services
President, Audimation Services, Inc.
Advisory Partner, Forensics & Investigations
Deloitte Financial Advisory Services LLP
President & CEO
For more information, contact the Center for Audit Quality at (888) 817-3277 or firstname.lastname@example.org.
Additional resources on fraud deterrence and detection can be found at www.antifraudcollaboration.org.