A new report from a group of organizations known as the Anti-Fraud Collaboration recommends ways to combat financial reporting fraud.
The new report, The Fraud-Resistant Organization: Tools, Traits, and Techniques to Deter and Detect Financial Reporting Fraud, marks the latest effort from the Anti-Fraud Collaboration, an initiative whose members include the Center for Audit Quality, Financial Executives International, the Institute of Internal Auditors, and the National Association of Corporate Directors.
The report provides information about the conditions that might make an organization more susceptible to fraud, and how to mitigate those conditions.
“All players in the financial reporting supply chain must work together to deter and detect financial reporting fraud,” said CAQ executive director and Anti-Fraud Collaboration co-chair Cindy Fornelli in a statement. “The report highlights vital roles and responsibilities and provides each party with knowledge they can use to reduce the potential for fraud.”
The report identifies three central themes that are critical to fraud deterrence and detection—strong “tone at the top,” skepticism, and robust communications—and explains how financial supply chain participants can incorporate these important traits into their efforts and their organizations.
With the increasingly global nature of our economy and markets, the report also addresses overcoming challenges that multinational companies face in executing effective fraud deterrence and detection programs. These challenges include language barriers, differing cultural norms, and conflicting regulatory requirements.
“Financial reporting fraud can result in a loss of confidence in our capital markets, as well as losses in shareholder value,” said Michele Hooper, Anti-Fraud Collaboration co-chair and president and CEO of the Directors' Council. “This report offers valuable insights that can help companies mitigate those outcomes.”
The report defines financial reporting fraud as “a material misrepresentation resulting from an intentional failure to report financial information in accordance with generally accepted accounting principles,” focuses on financial reporting fraud at publicly traded companies of all sizes. Its scalable recommendations can be tailored to each specific organization.
For more information, visit www.antifraudcollaboration.org.
Separately, another group of organizations, including the Association of Certified Fraud Examiners and Maillie, are marking this week as International Fraud Awareness Week.
“The latest statistics tell us that fraud isn't going away, and companies that don't have protective measures in place stand to lose the most," ACFE president and CEO James D. Ratley, CFE, said in a statement. "That's why its reassuring to me to see so many businesses, agencies, universities, and other organizations involved in the Fraud Week movement. The first step in combating fraud is raising awareness worldwide that it is a serious problem that requires a proactive approach toward preventing it. Since our first Fraud Week more than 10 years ago, the movement continues to grow."
Fraud costs organizations worldwide an estimated 5 percent of their annual revenues, according to an ACFE study. If applied to the 2013 estimated gross world product, this translates to a potential projected global fraud loss of nearly $3.7 trillion.
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