Executive Roadmap to Fraud Prevention and Internal Control: Creating a Culture of Compliance, 2nd Edition

CHAPTER 17

A Fraud Prevention Culture That Works

EXECUTIVE SUMMARY

Building a fraud prevention culture that works is no longer an option in today's business world. It is a requirement for survival. The Sarbanes-Oxley Act, Federal Sentencing Guidelines for Organizations, Dodd-Frank Whistleblower Provisions, and other corporate governance enhancements require accountability and oversight. Fraud prevention was a requirement before Sarbanes-Oxley, and embedding that concept within the framework of an organization makes even better business sense now. This means that every organization, public or private, must have a zero tolerance for fraud of any kind. Fraud risk management based on a “checklist” mentality is not conducive to success in fighting fraud. Outstanding companies view compliance enhancements as opportunities to create a stronger fraud prevention program and an internal control system that ultimately give them a competitive advantage.

CRITICAL ROLE OF COMPLIANCE

At the height of the financial crisis, the SEC was so concerned that organizations would consider cutbacks in compliance spending and staff that it took a very unusual step to reinforce the critical importance of compliance programs. It sent a letter to all CEOs of SEC-registered firms warning that the last thing companies should do in response to the Great Recession was reducing its commitment to compliance. The letter discussed how “compliance is a vital control function that helps to protect the firm from ...