FRAUD AND CORRUPTION

Internal fraud consists in “a type of fraud that is committed by an individual against an organization. [Furthermore], a perpetrator of fraud engages in activities that are designed to defraud, misappropriate property, or circumvent the regulations, law, or policies of a company”[8]. Not only has the incidence of internal fraud increased in frequency because of the availability of sensitive information such as client details or confidential business documents; moreover, this type of fraud is found in various types of organizations, ranging from corporations, public service institutions and financial institutions. Our analysis will concentrate on the most common and prolific types of internal fraud, namely identity theft, insider trading, loan fraud and wire fraud. Interestingly, PriceWaterhouseCooper conducted a survey that revealed that the “demographics of a typical fraudster are as follows: males (85% of cases), 31-50 years (72% of cases), reached high-school level (50%), Bachelor’s or post graduate degree (50%) and middle or senior management (52%)”[9].

According to Harvard Law School’s article, approximately two-thirds of companies in the U.S. are affected by fraud. However, whistleblower Hotline can be as defense against management overrides. The article noted that whistleblower could be more effective if it become as apart of the corporate compliance programs and a reward of any monetary sanctions collected to motivate the employees Also, the article mention that the employees

One thing we know is that not everyone is trustworthy and has high morals. Just like there are dishonest customers the same can be say for workers of a company. A company must have internal controls that can help them identify both dishonest employees as well as customers. Employee thief cost the company more because of the time and the extra internal controls that must be put in place not to mention

5.6.1 There are several factors that can contribute to fraudulent activity. Firstly, the presence of the motivation for an employee to commit fraudulent action, such as being under financial pressure, having unmanageable debt or an addiction. Secondly, an opportunity to carry out fraudulent activities, such as poor internal controls implementation or wrong segregation of duties, coupled with a lack of physical security measures like CCTV cameras, locked money tins and boxes. Low ethical and moral standards of managers can lead to employees following the same pattern. Also, a lack of effective communication within the organisation, so that employees do not feel appreciated, or that their work is not valued. Common types of fraud are: illegal

Fraud costs the Australian economy approximately $3 billion annually (Standards Australia 2008), and its frequency and financial impact continues to grow (Standards Australia 2008 ; KPMG 2008). Many organizations are poorly prepared to prevent and detect fraud (KPMG 2009 ; KPMG 2008 ; KPMG 2007 ; KPMG 2004). Fraud prevention is not perfect therefore, fraud detection is crucial. Fraud detection strategies are intended to quickly and efficiently identify those frauds that have circumvented preventative measures so that an organization can take appropriate corrective action (Standards Australia 2008). Occupational fraud is divided in three categories. The production of fraudulent statements is most of the time orchestrated at executive-level,

According to the Certified Fraud Examiners’ 2012 Report to the Nations, organizations typically lose five percent of revenues to fraud annually (Laxman, Randles, & Nair, 2014). Fraud impacts more than just a bottom line; it can cause significant damage to a firm’s reputation, seriously hurt investors, and degrade morale and opportunities for employees. As evidenced by recent highly publicized cases, internal controls are an important function of business and government and are necessary in reducing the negative impact of fraud in our economy (Brucker & Rebele, 2010).

As a remedy to the situation, the analysts recommended an educational program regarding ethics in administration and in the normal operations of the company. Good organizational behavior requires that the workers have good speaking and listening skills (Johnson, 2012). This helps to foster good relationships with other workers and the management through due to proper

The risks and rewards of corporate fraud incline many to question what some motivations of fraud are. The most evident motivating factors are certainly money and power. The corporate world offers many lucrative positions that come with generous salaries, along with these benefits come nefarious means of achieving ambitions. The fraud triangle is a well known tool created by Donald R. Cressey which helps to, “explain the reasoning behind a worker’s decision to commit workplace fraud” (HR Zone, par. 1). There are three aspects designed to break down some motivating factors for fraudulent activity. Pressure, or incentive, indicates a person must feel the need for the money they are obtaining illegally such as insufficient revenue, low stock prices, or personal expenses. Opportunity illustrates a person has the

In today’s information world, monitoring and securing confidential data in companies has become a trending issue as most of the fraudsters are covert which makes them difficult to identify. Occupational fraud refers to stealing a company’s assets such as money laundering, employee violations of the code of conduct, and theft. Most of the fraud occurs through fraudster vested interests. Company executives or staff commit fraud based on the fraud triangle which is opportunity, rationalization, and pressure. Based on these three aspects fraudsters tend to commit these crimes both internally and externally of the company. According to the survey conducted by ACFE, it is said that small organizations are losing 5% of their total revenues each year. In that survey, the highest occurrence of fraud was committed with misappropriation of assets with around 85%. Financial statements fraud fell to 9%, and corruption is 37%. Even though financial statement fraud was low in the survey, its costs are huge with a loss of 1 million dollars (ACFE.com). Frauds occur not only on the inside of an organization but also from outside the company. In a recent study, organizations face high pressure to protect their assets from hackers like those that broke

Most of the employees in the government sector are paid low wages and salaries. Hence, some of them couldn’t afford for the daily life expenses but revert to corruption

Fraud is not prejudice; culture, ethnicity, and religion, are not factors in determining who will commit fraud. Finding fraud can be difficult. We 're constantly reminded at every client consultation, audit, fraud and accounting conference we attend that fraud is inherently hidden. Deception, alteration, fabrication and the destruction of documents seems to be the norm for all fraudsters, yet qualified anti-fraud professionals can

Charges of corruption may be alleged, and could be either real or imaginary. Consequently, an organization’s best defense against fraud is to be proactive, including gaining an understanding of how to identify potential indicators of corruptive behavior by managers. It is important that the organization take action as quickly as possible to prevent corruption. Further, examination of common indicators of potential corruption, and abuse is beneficial in the identification of potential information technology fraudulent activities.

If I suspected fraudulent activity within n organization where I work, I would use a professional skepticism approach. This can be broken down into there attributes:

To help individuals report, it is suggested the management should start a whistle blowing hotline. Such a hotline can be a critical component of the company’s anti corruption efforts as tips can be a common way of detecting frauds.

Employers can do the following to maintain the integrity of their employees. (NOTE: Answers are introduced in this chapter and covered in more depth in Chapter 7)