Corporate Fraud and Internal Control + Software Demo: A Framework for Prevention

CHAPTER FIVE

Fighting Corruption

But when you have bad governance,... these resources are destroyed: The forests are deforested, there is illegal logging, there is soil erosion. I got pulled deeper and deeper and saw how these issues become linked to governance, to corruption, to dictatorship.

—Wangari Maathai, Kenyan activist (b. 1940)

After studying this chapter, the reader should be able to:

• Identify areas of vulnerability within the organization that expose it to managerial level frauds and internal corruption.
• Identify areas and indicators where the organizations may be unwittingly or deliberately the perpetrators of such corruption against third parties.

Corruption is defined in the Oxford English Dictionary as “dishonest or fraudulent conduct by those in power, typically involving bribery” and “the action or effect of making someone or something morally depraved.” From this highly conceptual definition, it is apparent that corruption comes in a multiplicity of forms with perhaps the most common being bribes used to influence the award of public contracts, affect judicial decisions, derive various benefits from the public sector, and even lower tax liability.

As a result, the term corruption can signify different things to different people and its interpretation is partially based on culture. That which is classified as “corruption” within one society or even within one organization may be seen as the customary and accepted way of doing business within others. It is this ...