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Chapter 14. Occupational Fraud and Abuse: The Big Picture. Learning Objectives. Understand and describe abusive conduct. Determine why attempting to achieve perfection in the workplace is not desirable.

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chapter 14

Chapter 14

Occupational Fraud and Abuse:

The Big Picture

learning objectives
Learning Objectives
  • Understand and describe abusive conduct.
  • Determine why attempting to achieve perfection in the workplace is not desirable.
  • Explain the obstacles to accurately measuring the level of occupational fraud and abuse in organizations.
  • Determine why greed is an inadequate explanation for occupational fraud and abuse.
  • Explain the concept of “wages in kind.”
  • Compare and contrast fraud prevention and fraud deterrence.
learning objectives1
Learning Objectives
  • Explain the significance of the “perception of detection.”
  • Identify some of the factors related to increasing the perception of detection.
  • Explain the relevance of adequate reporting programs to fraud deterrence.
  • Understand the implications of the Corporate Sentencing Guidelines.
  • Understand ethics and ethical theory.
defining abusive conduct
Defining Abusive Conduct
  • In a Hollinger and Clark study, 9 out of 10 employees admitted to committing abusive conduct at some level
  • Cannot eliminate the problem in the workplace without eliminating people
  • In establishing antifraud standards, make them clear and reasonable
measuring the level of occupational fraud and abuse
Measuring the Level of Occupational Fraud and Abuse
  • The human factor
    • Greed
    • Wages in kind
    • Unreasonable expectations
understanding fraud deterrence
Understanding Fraud Deterrence
  • Prevention removes the root cause of the problem
  • Deterrence modifies the behavior through perception of negative sanctions
  • The impact of controls
perception of detection
Perception of Detection
  • Employees who perceive that they will be caught engaging in occupational fraud and abuse are less likely to commit it
perception of detection1
Perception of Detection
  • Employee education
  • Proactive fraud policies
  • A higher stance by management, auditors, and fraud examiners
  • Increased use of analytical review
  • Surprise audits where feasible
perception of detection2
Perception of Detection
  • Adequate reporting programs
    • Fraud, waste, and abuse occur at some level in nearly every organization
    • This conduct costs jobs, raises, and profits
    • Organizations should actively encourage employees to come forward with information
    • There are no penalties for furnishing good-faith information
    • There is an exact method for reporting
    • A report of suspicious activity does not have to be made by the employee to his immediate supervisor
the corporate sentencing guidelines
The Corporate Sentencing Guidelines
  • Seek to make punishments more uniform
  • Increases the severity of the punishment
  • The presence of an effective program to prevent and detect violations of the law are rewarded with a more lenient sentence
the corporate sentencing guidelines1
The Corporate Sentencing Guidelines
  • Vicarious or imputed liability
    • Corporations can be held criminally responsible for the acts of their employees
    • The corporation will be held criminally responsible even if management had no knowledge or participation in the underlying criminal events
    • Can be criminally responsible for the collective knowledge of its employees
the corporate sentencing guidelines requirements
The Corporate Sentencing Guidelines – Requirements
  • Have policies defining standards and procedures for agents and employees
  • Assign specific high-level personnel with responsibility to ensure compliance.
  • Use due care not to delegate significant discretionary authority to people who have a propensity to engage in illegal activities.
the corporate sentencing guidelines requirements1
The Corporate Sentencing Guidelines – Requirements
  • Communicate standards and procedures to all agents and employees and require participation in training programs.
  • Take reasonable steps to achieve compliance.
  • Consistently enforce standards through appropriate discipline
  • Take all reasonable steps to appropriately respond to offenses and to prevent further similar offenses
the ethical connection
The Ethical Connection
  • That branch of philosophy which is the systematic study of reflective choice, of the standards of right and wrong by which a person is to be guided, and of the goods ­toward which it may ultimately be directed (Wheelwright)
the ethical connection1
The Ethical Connection
  • Imperative principle
    • Concrete ethical principles that cannot be violated
  • Situational ethics
    • Each situation must be evaluated on its own
essence of people
Essence of People
  • Humans as good
  • Humans as evil
  • Humans as calculating
ethics policy
Ethics Policy
  • Set out specific conduct that violates the policy
  • State that dishonest acts will be punished
  • Provide information on your organization’s mechanism for reporting unethical conduct
  • The policy can only be as good as the reinforcement it gets