Fraud Prevention Tip #5: Build Out the Anti-Fraud Core Infrastructure
Okay, so you’re off to a good start. You’ve recruited your CEO and they have agreed to be both visible and vocal in support of the Anti-Fraud Campaign you initiated. You’ve also updated your organization’s Code of Conduct so that it now includes answers to the real-world situations employees encounter and requires an annual sign-off by everyone. It also requires that everyone positively acknowledge they’re not aware of any wrongdoing, misconduct, theft or outright fraud by anyone else.
So what else makes up the core infrastructure of a comprehensive Anti-Fraud Campaign?
Here is a summary of what should be on your agenda as you plan your next steps. Each of these will be discussed in detail in future articles. But this summary list will give you an outline of what to expect.
The fraud expectations for CPAs & CFEs are at an all time high. Despite what the professional standards and engagement letters say, most client managers and owners believe CPAs & CFEs have expertise in the prevention, detection and handling of wrongdoing and fraud. These beliefs, while often flawed, can still result in a gap between what is wanted and what CPAs & CFEs are capable of delivering.
Policy on Fraud Responsibilities – This essential policy is a call to action. It explicitly recruits every employee, manager and executive to the Anti-Fraud Campaign. In summary, it says:
- Like every other organization, we have risks related to fraud and misconduct (it’s a fact of business life, unfortunately)
- We need your help to manage these risks (we’ll do this together)
- Know what can go wrong in your area (we’ll teach you)
- Do your best to make sure it doesn’t happen on your watch (we’ll show you how)
- Pay attention and speak up right away when you suspect something is wrong (we’ll make it safe and easy for you to report)
Anti-Fraud Controls and Daily Behaviors – Control procedures should be designed and implemented to protect the organization’s people, assets, information and reputation. But designed procedures are just pages in a corporate manual unless there is awareness, interest, and daily execution of anti-fraud controls by everyone on staff.
Anti-Fraud Skills Training – Once controls are put into place and employees are recruited, they also need to be trained. Few employees start their careers with the skills to fight fraud. They need to be taught. Not just awareness – specific skills. Training should cover examples and details covering what can go wrong in their work areas, what it looks like in documents and reports they see, and how they should react.
Require Reporting of Suspicions and Make it Easy to Report – Informed front-line employees are your best line of defense against fraud. Everyone must pay attention and be required to report suspicions. Leaders should put in place options for employees to report their suspicions safely, including installing anonymous reporting hotlines and other tools.
Conduct a Fraud Exposure Assessment – This can be a formal or informal effort to sit down with everyone and openly discuss “What can go wrong?” Create a list of exposures and risks, and tie this list to effective controls and behaviors to prevent and/or promptly detect wrongful acts.
Response Planned in Advance – As with any business risk, an incident response plan should be created and put in place before it’s needed. Everyone should be briefed on what to do and what to avoid when fraud is suspected. Professionals with fraud handling expertise should be identified. Decisions about how and when to report to the authorities, approved steps to stop the fraud and recover losses, what to say to the press if appropriate, and what to tell employees should all be considered in advance of the crisis response moment.
In future articles we’ll go deep into these and dozens of additional core components of an Anti-Fraud Campaign for your organization or clients.
Stay tuned, and let us know if we can help you tailor these steps to your unique needs.
John J. Hall, CPA
John J. Hall, CPA, is an author, speaker and results expert who presents around the world at conventions, corporate meetings and association events. Throughout his 35-year career as a business consultant, corporate executive and professional speaker, John has helped organizations and individuals achieve measurable results. He inspires audience members in corporations, not-for-profit organizations and professional associations to step up, take action and “do what you can.”