Corporate Fraud and Internal Control + Software Demo: A Framework for Prevention

CHAPTER SEVEN

Controlling Fraud

The mistake you make, don’t you see, is in thinking one can live in a corrupt society without being corrupt oneself. After all, what do you achieve by refusing to make money? You’re trying to behave as though one could stand right outside our economic system. But one can’t. One’s got to change the system, or one changes nothing. One can’t put things right in a hole-and-corner way, if you take my meaning.

—George Orwell, English novelist and journalist (1903–1950)

After studying this chapter, the reader should be able to:

• Define the roles of corporate governance and the structures utilized by the organization to prevent fraud.
• Evaluate the system of internal control relied on by the organization to minimize fraud and make practical recommendations for improvement where required.
• Understand the internal audit role in controlling fraud.

Controlling fraud goes beyond giving the appearance of tackling the problem by tinkering with some of the fundamental causes. Not only has it become essential in both commerce as well as governments to reduce fraud to the lowest achievable level, but it also is necessary to implement the appropriate control structures to maintain fraud at that level into the future. Ensuring the integrity of systems and personnel enables the organization to focus on its primary business objectives regardless of the nature of the industry or governmental function.

CORPORATE GOVERNANCE AND FRAUD PREVENTION

In their 2003 investigation ...