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

CHAPTER 13 The Sample Anti-Fraud Program

SIMPLE PRACTICALITY IS the goal we set out to accomplish. The design of an effective and efficient anti-fraud program doesn’t have to be difficult. It should be simple and practical. I believe we have accomplished that objective.

We laid a solid foundation (environment), installed the floor (risk assessment), raised the walls (control activities), put in the ceiling (information and communication), and topped it off with the roof (monitoring).

You’ve worked hard. Enjoy living in the fruits of your labor!

MED ENTERPRISES, INC. COMPANY ANTI-FRAUD PROGRAM

Introduction

The board of directors of MED Enterprises, Inc. (the “Company”) has established this program to address the risk associated with internal fraud. Internal fraud is defined as fraud perpetrated against the Company by our own employees. The purpose also includes the establishment of an environment that promotes and recognizes honesty and integrity in the workforce and a safe and pleasant working atmosphere.

Internal fraud includes three types of fraud: misappropriation, corruption, and financial statement fraud, illustrated as follows:

1. Misappropriation: This is defined as the taking of company assets whether cash, inventory, or other fixed assets. This is the most common type of fraud.
2. Corruption: This type of fraud is represented by collusion between at least two individuals (one employee and a nonemployee or two employees), including conflicts of interest in purchasing and ...