How Companies Avoid Fraud or Corruption

Fraud Risk Management in Business

Previously, little has been written here. The original title of 'Managing the Business Risk of Fraud: A Practical Guide'. This paper is sponsored by the AICPA, IIA, and ACFE, three leading professional associations in the field of Accounting, Internal Auditing, and Fraud.

In this paper the definition, fraud is an intentional action (to do or not do), aim to deceive others. Fraud causes losses to another person and the perpetrator make a profit.

As a result of fraud or corruption:
1. Corporate bankruptcy
2. Investment losses
3. Legal settlement costs
4. The actors included prisoners
5. Decline in confidence, especially in the stock market
6. The destruction of the brand (brand) companies

Some regulation or regulations related to fraud such as:
1. U.S. Foreign Corrupt Practices Act or FCPA (1997)
2. Oganisation for Economic Co-operation and Development Anti-Bribery Convention (1997)
3. The U.S. Sarbanes-Oxley Act (2002)
4. The U.S. Federal Sentencing Guidelines (2005)

Number of corporate scandals (Corporate Scandals) make the public and stakeholders voiced no tolerance for fraud (no fraud tolerance).

According to the principles of good governance (Good Corporate Governance), the board of directors (board of directors) is responsible for running the organization with full responsibility and ethics.

The Committee of Sponsoring Organizations of the Treadway Commission's (COSO's) in 1999 analyzed the cases of fraud in the financial statements being investigated by the U.S. Securities and Exchange Commission (SEC). COSO's finding that:

Directors have an important role in fraud risk management because the majority of the fraud was conducted by senior management (such as CEO, CFO, or the same level) who in collusion with other employees.

According Oversights Systems Report on Corporate Fraud (2007), the main reason that caused the fraud is:
1. The pressure to meet the needs (81%)
2. To get the benefits (72%)
3. Do not consider what he is doing is including fraud (40%)

Some key principles in the fraud risk management, namely:
1. Companies should have a fraud risk management (fraud risk management).
2. Companies should evaluate the risk of fraud on a periodic basis to identify any potential fraud and what should be done to anticipate them.
3. Companies implementing fraud prevention technique for potential fraud risk no. (2) above.
4. Implement fraud detection techniques to identify fraud early.
5. Creating a fraud reporting system and follow up / investigation of the fraud occurred.