Fraud

Hey everybody! I’ve got good news and bad news. First, I’ll give you the good: another exciting edition of Mike Talkin’! Now the bad news: this is the second to last blog ever. I do feel bad since your lives won’t be as complete as before, but life goes on. Today’s topic concerns corporate fraud and the dangers associated with it. Fraud is a growing epidemic among American businesses. It is an internal depletion of a corporation’s assets by theft, embezzlement and other dishonest practices which robs their livelihood. For example, in 2003 U.S. businesses lost 600 billion in assets, a significant increase of $200 billion from a time frame shy of a decade. Enron violated internal ethic practices by buying and selling stocks based on information that was not available to the public. They practiced creative accounting by inflating the value of their assets to gain greater profits and advantages in the market. Arthur Anderson, Eron’s accounting firm also committed fraud in their weak efforts to sufficiently audit their client based off of the higher margins of profit gained from having them as a client.

Fraud also exists in non-profit organizations by workers taking donations, allocating funds to places not agreed upon and paying personal debts with funds that are intended to go to the charities. This practice of dishonesty by creating fake vendors and invoice sheets to allocate monies can exist with any charitable organization. For example, the American Cancer Society’s New York branch created a system in which allowed them to receive a massive volume of 4 million dollars in tax deductions by falsely writing off their tax income returns.

The prevention of fraud lies in a company’s effort to continue to do extensive background checks on their employees along with allocating a strong internal auditing of their assets. Also, by not letting one manager or accountant control most of the cash flow and delegating this responsibility, this would enforce a greater checks and balances system to lower the risk of fraud. Assessing a corporation’s current fraud risk can help with the prevention of dishonest practices by allowing a company to examine which aspects of business need the most security. I think that the most effective and low cost prevention is for the mission of the company to be honesty and for the leaders of the company to set an example of how an organization can be successful without cheating.


Sources:
1. http://www.super-solutions.com/EmployeeFraudandWorkplaceEthics.asp
2. http://encarta.msn.com/encyclopedia_701610398_2/Enron_Scandal.html

3. http://www.protiviti.com/portal/site/pro-us/menuitem.38fa3ddccd35956bbdd22d10f5ffbfa0?showGray=yes&file_name=%2FKnowledge%2FFeature_Articles%2FFeatureArticle_20090327.html

4. http://www.nysscpa.org/cpajournal/2006/106/essentials/p56.htm