Question
Fraud Prevention Program
[/et_pb_text][et_pb_text _builder_version="4.9.3" _module_preset="default" width_tablet="" width_phone="100%" width_last_edited="on|phone" max_width="100%"]
| Subject | Law and governance | Pages | 3 | Style | APA |
|---|
Answer
Benefits of a Comprehensive Control Program
Fraud is the unlawful deceit aimed at creating a financial or personal gain. Scams in businesses have been a common issue lately (Biegelman & Bartow, 2012). Frauds are usually not discovered immediately; that is why fraud prevention programs are put in place. This improves the business's chances of identifying the problem earlier, thus reducing the number of losses. A fraud deterrence program is intended to safeguard the firm and its assets. There are several benefits to setting up a fraud prevention program. Some of them are the prevention of catastrophic financial losses, maintaining healthy competition in the market, and increasing confidence in the businesses.
Losses from fraud can either be minimal or claustrophobic. It is determined too with time. If fraud is recognized earlier, Rezaee (2002) says it is possible to reverse the effect. Still, when a scam is not identified on time, it poses a great danger to the firm as it may experience significant financial losses that may be claustrophobic. A fraud prevention program helps curb this and may also prevent future frauds.
According to Luca & Zerva (2016), an organization that has invested in the fraud prevention program gains a significant competitive advantage over its rivals. Fraud-free organizations reduce losses arising from pilferage while benefiting from the effective use of the company's resources. Business with a higher profit margin fit best in the competitive world than the rest.
Better investments, business partners, insurance risks, suppliers, and customers are expected from a firm with a robust fraud prevention program. There is more confidence in a company that can control its fate by reducing risks of fraud using the fraud prevention method.
- Procedures to be Considered for Detective Controls
Detective control is a type of internal control that helps to uncover problems in a firm's processes. Proper fraud detection and prevention efforts involve matching the most effective control measures with the different risks of fraud. They are several control procedures that could be used.
- Adequate segregation of responsibilities or dual custody
Segregation of responsibilities is dividing a task into parts so that it is effectively done by two people or more people who are competent (Hess & Cottrell, 2016). Dual custody is preferred in sensitive departments where a lot of accountability is required. For instance, an organization could have two accountants to ensure accountability. Alternatively, the department could be made to work hand in hand with auditors to certify the accuracy of financial reports made.
- Physical control over records and assets
Physical precautions entail installing security features to deter people from accessing assets and records they are not authorized. Examples include vaults, safes, locks, and keys. These safeguards lock out unauthorized persons thus ensuring security and safety of property. Taking such measures limits the number of people who can access the company’s records.
- Independent Checks
Li, Bonsu, Asare, Dominique & Johnson (2018) content that when a person knows that their job is going to be scrutinized, they often do their best thus providing the best possible quality. On the contrary, when employees are not subjected to independent checks, they can easily produce sub-standard jobs. In addition, there are higher possibilities or errors and wastage. Some of the best independent checks include supervisor reviews, audits, feedback systems.
- Documents and Records
Documentation of workplace processes and instances of security could make it easy to identify trends in crime. As a result, keeping records could help predict future possibilities of fraud in an organization. Similarly, it could help identify specific sections or departments within an organization that are vulnerable to fraud. As a result, the management will introduce measures to prevent such occurrences.
- Hotlines as a Tool for Preventing and Detecting Fraud
Hotlines, also known as the tip lines, are management tools designed to enable concerned employees and third parties to report any suspicious activity of fraud and misconduct confidently. Hotlines allow whistleblowers to communicate their concerns and suspicions to respective authorities, who make follow-ups and take corrective actions. Li et al. (2018) confirm that tip lines are a proven fraud deterrent that can be successfully implemented without much effort. Tip lines should have the following characteristics for it to be effective. First, they should be anonymous. It must uphold anonymity and confidentiality as any identity disclosure may result in the future unwillingness of the employees to report. Secondly, it should be readily available. Tip lines should be open every 24 hours per day. Third, it should support different languages (multilingual). Hotlines should offer more than one language due to the cross-cultural nature of the modern organization. Fourth, there should be employee awareness of the pros and cons of hotlines. Implementation of a tip line requires employee training on how to use and promote them. Besides, they should be made aware of the positive and negative implications of using hotlines. Fifth, the hotlines should have a database to ease case management. Case management functions permit the firm to track a report from its beginning until it ends. It helps with the follow-ups, the actions are taken, and the report creation.
Tip lines have been proven as the best tools for identifying and preventing fraud. They not only enhance the monitoring of employees but also reinforce a firm's code of conduct since unethical behaviors are reported. Access, anonymity, and multilingual capabilities and consideration of the company's operation are critical considerations in designing the hotlines to ensure the implementation of an active tip line.
- Encouraging a culture of honesty, openness, and assistance in a business.
The best approach to cultivating a culture of openness, honesty, and assistance in an organization is by adopting the following strategies. First, improving the vetting process when hiring new employees. The hiring process should look for candidates who have a background of honesty and ethical conduct. This approach sets the foundation for nurturing a culture of moral and ethical behaviour. Secondly, management should create a positive work environment. A positive work atmosphere has a distinct code of conduct; it does not function on an emergency basis. Instead, it has excellent personnel and usually has an open-door policy (Booth 2018). When employees work in a positive environment, they tend not to commit any fraud. Third, the organization should provide employee assistance programs. These programs help employees deal with their pressures without feeling intimidated.
- Personal Thoughts on the Possibility of a Culture of Honesty, Assistance, and Openness
Based on personal experience and reflection, it is quite elusive for companies to uphold a 100% culture of honesty, assistance, and openness. This statement is backed by several empirical proves. For instance, at my place of work, the management has made every effort to encourage honesty. This includes using an open-door policy and a flat organizational structure to empower employees to communicate openly. Nonetheless, there are a few instances where employees fail to be honest and open to each other and the management. This trend could be attributed to factors such as organizational politics, where some employees believe that holding valuable information could give them an advantage over their colleagues. Another real-life example is the ‘diesel gate scandal’ at Volkswagen (Hotten, 2015). As much as the organization has a reputation for honest conduct, the scandal shows the elusiveness of maintaining a fair and open organization. This example further shows that as much as an organization might try to uphold specific standards, some employees might want to engage in dubious dealings to undermine these standards.