Professional Documents
Culture Documents
Chapter 4 Preventing Fraud
Chapter 4 Preventing Fraud
CHAPTER 4
PREVENTING FRAUD
BY :
115020307121005
115020307121014
ORGANIZATIONAL CULTURE
Three major factors in fraud prevention
relate to creating a culture of honesty,
openness, and assistance.
1.
2.
3.
2.
Discourage collusion
3.
4.
5.
INTERNAL CONTROLS
WHISTLE-BLOWER SYSTEM
Effective systems have the following:
Anonymity
Independence
Accessibility
Follow-up
2.
3.
4.
SHORT CASE 1
Karen, a friend of yours, recently started her own
business, The Bike and Boulder Company (B&B).
B&B specializes in the sales of mountain bikes
and rock climbing equipment. Karen is putting
the finishing touches on her company policies and
procedures. She knows you are taking a fraud
class and asks you to review what she has
completed thus far. You quickly notice that Karen
has neglected to address fraud and fraud
prevention in her policies and procedures. What
policies and procedures would you suggest Karen
implement to prevent and detect fraud at B&B?
ANSWER :
1. Having good internal controls,
2. Discouraging collusion between employees and customers
or vendors and clearly informing vendors and other
outside contacts of the companys policies against fraud,
3. Monitoring employees and providing a hotline (whistleblowing system) for anonymous tips,
4. Creating an expectation of punishment,
5. Conducting proactive auditing.
Each of these methods reduces either the actual or the
perceived opportunity to commit fraud, and all of them
together combine with the culture factors described earlier
to provide a comprehensive fraud prevention program.