I need help with a Management question. All explanations and answers will be used to help me learn.
Fraud is any dishonest activity that causes actual or potential financial loss to an organization (Johansson and Carey, 2016, p. 291). Fraud is a white-collar crime that includes asset misappropriation, statement fraud, timecard fraud, and corruption. Fraud is prevalent in cooperate organizations and can cost companies millions of dollars over time. Effective fraud prevention measures are essential to prevent significant losses from these types of crime. Fraud differs from other crime in that it often happens in small occurrences that are spread over the course of several months. Smaller fraudulent transactions are harder to detect and easier to rationalize by the individual. There are numerous reasons for fraud occurrence such as financial pressure, habit, greed, poor internal control and poor supervision (Mangala and Kumari, 2017, p. 137). Fraud can also be imbedded in an organizations culture and an attitude of “this is how we’ve always done it” can significantly contribute to fraudulent activity.
According to Mangala and Kumari strong corporate governance and ethical code of conduct build up a positive work environment and prevent occurrence of fraud (2007, p. 137). While Mangala and Kumari focus on prevention and deterrence, Johansson and Carey focus on detection. Johansson and Carey report that organizations with robust Anonymous Reporting Channels (ARCs) such as whistleblowing detect a higher incidence of fraud and a greater number of frauds (2017, p. 406). A combination of deterrence and effective detection provides a layered defense against fraud and will reduce losses.
The Internet has added an additional complexity to fraud in that it has negatively and positively impacted companies. Company systems that are Internet based are vulnerable to fraudulent abuse. Since the inception of the Internet companies have adopting Internet based business systems. For example, many companies that used paper time keeping records have changed to lower-maintenance electronic systems. There are many third-party software companies that offer Internet based scheduling and timekeeping capabilities for a nominal fee. Changing from a more rigorous and accountable paper time card to self-reporting hours worked in a computer can be vulnerable to fraudulent activity. On the other hand, checks and balances can be incorporated into electronic Internet systems to assist in prevention and investigation. In addition, the Internet has also assisted whistleblowers in staying anonymous in reporting fraudulent activity. Potential whistleblowers can easily research organizations that hold fraudster accountable and contact them through email.
In summary, fraud undermines the success of an organization and selfish greed can eventually cost a company millions of dollars. The Internet has both benefited and damaged companies in regards to fraud and security professionals have to develop modern ways to mitigate this concern. It is of significant important that companies develop codes of conduct that contend with cultures and sub-cultures that justify fraudulent activity. Codes of conduct should also encourage whistleblowers as a check and balance on potential fraudsters.
Thanks,
Dan
References:
Johansson, E., & Carey, P. (2016). Detecting fraud: The role of the anonymous reporting channel: JBE JBE. Journal of Business Ethics, 139(2), 391-409. doi:http://dx.doi.org.ezproxy2.apus.edu/10.1007/s10551…
Mangala, D., & Kumari, P. (2017). Auditors’ perceptions of the effectiveness of fraud prevention and detection methods. Indian Journal of Corporate Governance, 10(2), 118-142. doi:http://dx.doi.org.ezproxy1.apus.edu/10.1177/097468…
