Incentives / Pressure GREED Personal financial trouble

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Presentation transcript:

Incentives / Pressure GREED Personal financial trouble Management opportunity for huge gains Employee opportunity to share in those gains Personal financial trouble Living beyond means Vice Financial emergencies Work-related pressure Pressure to perform Under-compensated employees

Opportunity Poor controls / control override Failure to discipline perpetrators Ignorance / apathy / capacity (available victims)

Internal Control Overview Control Environment Accounting System Control Activities Monitoring

Control Environment “Tone at the top”: Management attitude and example Communication about ethics Appropriate hiring (competence and honesty) Clear organizational structure

Control Activities Segregation of duties System of authorization Independent checks Physical safeguards Documents and records

Attitude / Rationalization Lack of ethical values Otherwise ethical individual rationalizes actions

Note from a fraud detection perspective Opportunities easiest to assess Incentives / pressure can be assessed if work-related Personal incentives, attitudes difficult to assess

Note from a fraud prevention perspective Opportunities Easiest to control Focus of most companies’ fraud prevention efforts Incentives, Attitudes More difficult to control Will return to this discussion later