Create An Army of Fraudbusters Within Your Organization

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According to a recent survey by the Association of Certified Fraud Examiners (ACFE), at least 60 percent of fraud is uncovered because of employee tips. "The best weapon a corporation has to combat corporate fraud is its own employees, regardless of their level or rank. With the right measures in place, a company can create its own army of fraudbusters extending throughout the organization," said Jonathan Marks, partner-in-charge of Crowe's fraud and ethics group.

Fraud is costly and on the rise. In 2008, an estimated $994 billion was lost by U.S. corporations due to occupational fraud, according to ACFE. Another ACFE survey showed that 90 percent of respondents expect fraud to continue to rise in the next 12 months.

According to Marks, most organizations find that a strong ethical environment encourages self policing, thereby increasing the level of oversight far beyond what internal controls methods alone provide. He suggests organizations follow these steps to establish a strong corporate culture to help prevent and detect fraud:

    --  Know who you hire. Contact references and verify educational backgrounds
        of potential employees before hiring them. Conduct criminal and
        financial background checks on prospective employees who are under
        consideration for executive-level or financially sensitive positions.
    --  Create an ownership environment. Employees who act and feel like owners
        of the company are generally less likely to commit fraud. A culture of
        ownership promotes shared responsibility of company successes and
        failures and creates a more committed and, in some cases, a more
        productive workforce.
    --  Reduce pressure. Reducing excessive pressure to meet third-party
        expectations and financial targets, as well as eliminating perceived
        threats to personnel's financial stability also helps in the fight
        against fraud.
    --  Keep employees informed.  Make sure employees know and understand new
        policies and procedures. Annual organization-wide business practices and
        ethics training helps to ensure that a consistent message is delivered
        to all employees.
    --  Set up an anonymous hotline. Establish procedures for the receipt,
        retention and treatment of complaints regarding accounting, internal
        accounting controls or auditing matters. Anonymity is important in
        protecting a whistleblower from possible retaliation.
    --  Establish sound internal controls. Organizations should understand the
        fraud risk and use a combination of external and internal audits,
        technology-driven monitoring, surprise audits and other procedures to
        help evaluate and ensure the adequacy of the internal controls.

    --  Implement checks and balances. While most fraud occurs in the
        non-management ranks, fraud by executives and managers often is more
        costly. Create an advisory committee to provide oversight at all levels.
        Be observant. When people know they are being watched, they're less
        likely to commit fraud.

About Crowe Horwath

Crowe Horwath LLP (www.crowehorwath.com) is one of the largest public accounting and consulting firms in the United States. Under its core purpose of "Building Value with Values®," Crowe assists public and private company clients in reaching their goals through audit, tax, risk and consulting services. With 25 offices and 2,500 personnel, Crowe is recognized by many organizations as one of the country's best places to work. Crowe serves clients worldwide as an independent member of Crowe Horwath International, one of the largest networks in the world, consisting of more than 140 independent accounting and management consulting firms with offices in more than 400 cities around the world.

SOURCE Crowe Horwath LLP

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