The Association of Certified Fraud Examiners wants top executives at public companies to open up their finances to scrutiny by auditors and regulators.

ACFE’s eight-member Board of Regents voted unanimously to call for such a law to be passed by Congress. The concept is dubbed “executive transparency” by ACFE chairman Joseph T. Wells (pictured). He first wrote about it in 2003 following the Enron and WorldCom fraud cases. The state of the economy and the exposure of high-profile frauds such as the Bernard Madoff scheme and the alleged Stanford fraud have led to a renewed urgency in calls for the measure.

In a letter to the new director of enforcement for the SEC, Robert Khuzami, Wells wrote, “Had it existed at the time, examination of the personal finances of insiders would have uncovered the Enron and WorldCom frauds much earlier; it may have done the same in the Madoff matter and others yet not detected. There are but two ways to trace ill-gotten gains of this type: from the organization to the insider or vice-versa. From our members’ collective experience in investigating more than a million cases of criminal and civil fraud, I can state without reservation that the latter approach works best.”

In the case of Madoff, the disgraced financier and convicted fraudster was reported to own multi-million dollar homes in New York and the Riviera, yachts in Florida and France, and art, jewelry and furniture worth millions of dollars. Altogether, Madoff and his wife claimed to have $823 million in assets, and investigators are working to determine how many of these assets were acquired through his multi-billion dollar Ponzi scheme.

Requiring executives to make their personal finances more transparent for auditors and regulators would expose the type of lavish spending that serves as a red flag for fraud. “The idea is long past due,” said ACFE Board of Regents member Jonathan E. Turner. “[Executive transparency] is about returning accountability to leadership. If we do that, we will reduce the incentives to commit fraud and thus reduce the impact and incidences of fraud.”

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