NCJ Number
80629
Journal
Financial Executive Volume: 49 Issue: 3 Dated: (March 1981) Pages: 28-32,34
Date Published
1981
Length
6 pages
Annotation
This article describes the changes corporate managers can make to deter fraud and the reasons why they should share this responsibility with auditors and company (internal) accountants.
Abstract
An extensive literature review revealed three major factors that cause fraud: situational pressures, opportunities to commit fraud, and personal integrity. The decision to commit fraud results primarily from an interaction of the three factors. Fraud can be reduced by eliminating the pressures and opportunities to commit fraud and by increasing personal integrity. If organizational leaders are sufficiently concerned about the possibilities of fraud within their companies, they can take several actions. Reducing situational pressures can be accomplished by not setting unrealistically high performance expectations; by removing unnecessary obstacles such as insufficient working capital, excess capacity, and obsolete equipment that block effective performance; and by establishing fair and uniform personnel policies. Reducing opportunities to commit fraud can be accomplished by maintaining accurate and complete internal accounting records and establishing a physical security system to secure company assets. Strengthening personal integrity can be accomplished by defining honest and dishonest behaviors, through examples set by organizational leaders and close coworkers, and by developing an organizational climate that emphasizes the importance of honesty. Finally, regardless of whether their influence is intended or unintended, the behavior of managers can increase or decrease the likelihood of material fraud. In conjunction with the accounting profession, corporate management can help deter fraud. No references are cited.