a management system for the prevention of corporate fraud nexia international congress. buenos...
TRANSCRIPT
A management system for the prevention of corporate fraud
Nexia International Congress.Buenos Aires, Argentina. October 2006
Santiago Altman, CPA, SSCI
What is fraud prevention?
• Is Corporate Governance– …by setting a rational organizational
structure.– …by setting a corporate credo and
fair standards in order to rule the relationships between the corporation and its community.
• Is Corporate social responsibility.• Is the due investigation of frauds
and the dissemination of its results.
Fraud prevention approach.
• Traditional and proposed approach.
• Fraud prevention system components.
• Objectives.• Main principles.• Continuous improvement
dynamic.
Approach differences
• Traditional approach: Challenge the internal control system with the objective to detect its vulnerabilities, or… how is possible to commit a fraud.
• Proposed approach: to know why the people commit frauds.
Fraud prevention system’s components.
Norms
Compliance control activities
Disciplinary actions
Objectives
1. To reduce the likelihood of fraud occurrence.
2. To mitigate the severity, if fraud occurs.
Main principles
• Fraud is an illegal activity based on human relationships.
• Leadership and leader’s example.• Understanding the gap between
people and organization life expectancy.
• The fraud is hidden.• The fraud is a normal
phenomenon within the organizations.
Differential association theory
Governance structure proposed
C o rp ora te A u d it
A u d it C o m m itte
In ves tig a tio n U n it
C h ie f C o m p lia n ce O ffice r
L O B D ire c to rs C O O C F O C IO
C E O
B o a rd o f D ire c to rs
S h a re h o ld e rs
1. Corporations must set a Disciplinary function and completely segregated from executive activities.
2. Chairman, CEO, and President functions must be vested to different executives.
System’s requirements
• The corporate ethic code is a public document.
• Whistleblower protection.• A Documented fraud prevention
policy.• A timely, planned, and
documented investigation.• Compliance activities results
must be published, at least once a year.
Continuous improvement dynamic
Policies setting
Starting situation assessment
Implantation planning
Incident recordkeeping
Investigation, corrective activities, and results dissemination. Audit
review.
System implantation, communication and
operation.
Review and approve corrective actions. Communication.
