FRAUD 01
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Last updated: 14 November 2010
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The Sarbanes Oxley Act requires the Chief Executive Officer (CEO) and Chief Finance Officer (CFO) to certify that incidents of fraud have been disclosed to the Companies Audit Committee, external auditors and any other relevant company finance/ governance committee.
The Sarbanes Oxley Act does not specifically defined fraud, however fraud generally involves some form of deceit, theft, trickery, acts or omissions or making of false statements, breach of trust and guilty intention with the object of obtaining money or other benefit. Fraudulent activities can be undertaken by management, employees or third parties (eg. suppliers or customers etc).
Most fraud incidents reported are for theft, however fraud can include intentional over claims by contractors, employees using a company credit card for benefits for which they are not entitled (contrary to company credit card policy) and selling off assets for significantly under fair market value (if the individual or a friend/ relative gains from the transaction).
Fraud can be reduced by ensuring:
- employees understand what fraud is and what it is not.
- having clear company policies on the management of company assets, and the responsibilities of
purchasing officer and employees able to purchase with company funds (company credit card holders).
- the requirement for a monthly reconciliation processes that ensures all purchases (including commitments to
purchase (POs) and disposal of assets) are reviewed and approved by a second person (typically the
employees direct report).
The subject of fraud should be included in the company's ‘Code of Conduct Training’, with all employees required to attend this training at least yearly. Employees need to be encouraged to report any suspicion of fraudulent activity and responsible points of contact need to be established to ensure any reports are received and investigated in the strictest of confidence.
Conversely, any employee under suspicion of fraudulent activity needs to be treated as ‘Innocent until proven guilty’ as often the findings of such reports turn out to be simple misunderstandings.
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The Sarbanes Oxley Act does not specifically defined fraud, however fraud generally involves some form of deceit, theft, trickery, acts or omissions or making of false statements, breach of trust and guilty intention with the object of obtaining money or other benefit. Fraudulent activities can be undertaken by management, employees or third parties (eg. suppliers or customers etc).
Most fraud incidents reported are for theft, however fraud can include intentional over claims by contractors, employees using a company credit card for benefits for which they are not entitled (contrary to company credit card policy) and selling off assets for significantly under fair market value (if the individual or a friend/ relative gains from the transaction).
Fraud can be reduced by ensuring:
- employees understand what fraud is and what it is not.
- having clear company policies on the management of company assets, and the responsibilities of
purchasing officer and employees able to purchase with company funds (company credit card holders).
- the requirement for a monthly reconciliation processes that ensures all purchases (including commitments to
purchase (POs) and disposal of assets) are reviewed and approved by a second person (typically the
employees direct report).
The subject of fraud should be included in the company's ‘Code of Conduct Training’, with all employees required to attend this training at least yearly. Employees need to be encouraged to report any suspicion of fraudulent activity and responsible points of contact need to be established to ensure any reports are received and investigated in the strictest of confidence.
Conversely, any employee under suspicion of fraudulent activity needs to be treated as ‘Innocent until proven guilty’ as often the findings of such reports turn out to be simple misunderstandings.
Would you please let me know if you enjoyed this short article by clicking here
Advice on Fraud