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

CHAPTER 3 Foundational Policies The Fraud Reporting Policy

IN THE MIDST OF BEING a certified fraud examiner, I was also a financial statement auditor for 26 years. As a result, I often had the opportunity to know the employees of an organization, and they knew me as well. As I reflect on my career thus far, one of these unique relationships stands out in my mind mainly because it scared me so badly.

I was working late, alone in my first-floor downtown office. My office had full-length vertical windows. Anyone passing by could see in with no problem; however, it was impossible for me to see outside in the darkness. I was already somewhat anxious being alone at such a late hour when I heard a loud knock . . . at my window! To say that I jumped out of my skin is an understatement. Unable to see out of my window, I ran to the front entrance of our building to find a 60-year-old woman waiting for me to let her in. It was Phyllis, an employee of one of my audit clients. She was desperate and visibly distraught. She was there to tell me that the manager of her organization was involved in committing fraud and had been for seven years. As we sat and talked, she provided information on how the fraud worked and how the manager had concealed it from us, the auditors, for such a long time. She told me that she could no longer sleep, could not enjoy her job, and even considered suicide to get away from it all. The more she talked, the calmer she became. She told me, “There just hasn’t been ...