Internal Control/Anti-Fraud Program Design for the Small Business: A Guide for Companies NOT Subject to the Sarbanes-Oxley Act

APPENDIX A The Fraud Policy

SAMPLE FRAUD POLICY ¹

Policy Statementg

The {Board of Directors/Owners} of ______________ are responsible for the prevention and detection of fraud. All parties should be familiar with the types of fraud that might occur and should be alert for any indication of fraud.

Scope

This policy applies equally to any fraudulent activity involving not only employees but also directors, vendors, outside agencies, and/or unknown parties, without regard to length of service, title/position, or relationship.

Actions Constituting Fraud

The terms fraud, misappropriation, and irregularities refer, but are not limited, to:

• Any dishonest or fraudulent act
• Forgery or alteration of documents
• Misapplication of funds or assets
• Impropriety in reporting transactions
• Profiting on insider knowledge
• Gifts from vendors (outside of limits)
• Destruction of records or assets
• Disappearance of records or assets
• Disclosure of confidential information
• Any similar or related irregularity

Nonfraud Irregularities

Identification or allegations of personal improprieties or irregularities, whether moral or behavioral, should be resolved by departmental management, executive management, and/or the human resources department, rather than audit-related departments or agencies.

Reporting Structure (Tailor to Your Organization, e.g., Committee Reporting, External Fraud Hotline)

The {board ...