Spring 2012 issue of Horizons

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• Is there an anonymous fraud reporting channel available to employees, such as a third-party hotline? • Do employees trust that they can report suspicious activity anonymously and/or confidentially and without fear of reprisal? • Has it been made clear to employees that reports of suspicious activity will be promptly and thoroughly evaluated by management or internal audit? To increase employees’ perception of detection, are the following proactive measures taken and publicized to employees? • Is possible fraudulent conduct addressed proactively rather than reactively? • Are surprise fraud audits performed in addition to regularly scheduled fraud audits? Does top management stress honesty and integrity? • Are employees surveyed to determine the extent to which they believe management and the board acts with honesty and integrity? • Are performance goals and budgets realistic? • Have fraud prevention goals been incorporated into the performance measures against which managers are evaluated and which are used to determine performance-related compensation?

typical U.S. organization loses 7% of its annual revenue to fraud. As if this statistic, provided by the Association of Certified Fraud Examiners

(ACFE), isn’t staggering enough, the organization also reports that in 63% of the cases, the losses were at least $100,000. In 25% of the cases, the losses were $1 million or more. While preventing and detecting fraud has its challenges, organizations that employ clear, and sometimes even simple, strategies can mitigate their risk dramatically. The ACFE reports that the single biggest method of fraud detection in a company is a system of tips or complaints. While no fraud prevention system can completely prevent all fraud from occurring, a strong system can significantly reduce an organization’s fraud risk. To assist our clients with fraud prevention strategies, RubinBrown has developed the following checklist. RubinBrown’s Fraud Prevention Checklist Is ongoing anti-fraud training provided to all employees of the organization? • Do employees have an understanding of what constitutes fraud? • Have the costs of fraud to the company and everyone in it — including items such as lost profits, adverse publicity (including loss of customers), job loss and decreased morale and productivity — been made clear to all employees? • Do employees know when and where to seek advice when faced with uncertain ethical decisions? • Do employees believe that they can speak freely? • Has a policy of zero-tolerance for fraud been communicated to employees through words and actions? Does the company have an effective fraud reporting mechanism in place?

• Have employees been taught how to communicate concerns about known or suspected wrongdoing?

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