Financial Fraud Prevention and Detection: Governance and Effective Practices

Preface

ALMOST ANY PUBLIC COMPANY can become a petri dish for fraudulent financial reporting. It can seep into a company's financial reporting system undetected. Once inside, it can silently grow. It can spread to involve more and more people. It can end up infecting any number of accounts. It can become so pervasive that even those responsible for the fraud don't know how bad it has gotten.

Over the last 15 years, the financial community has taken great strides against financial fraud. Sarbanes-Oxley has created enhanced mechanisms for fraud deterrence. Dodd-Frank has added enhanced incentives for whistleblowers. Companies have worked hard to improve their financial reporting cultures.

But to paraphrase Mark Twain, reports of the death of financial fraud are greatly exaggerated. In fact, an ostensible decline in financial fraud may have as much to do with the economic climate—and in particular the 2008 Financial Crisis—than with changes in the law. When times are tough, financial fraud will naturally decline because the pressure for spectacular results has dissipated. It is when the good times return that the risk of fraud increases.

This book seeks to assist in the battle against financial fraud. It warns of the insidiousness with which financial fraud starts and grows. It gives practical, concrete advice on fraud prevention. It addresses fraud detection and its aftermath so that, if financial fraud should be uncovered, a company can move beyond it as efficiently as possible. ...