Your organization's culture is unique, complex, and could be a significant driver of unethical behavior if left unchecked. Culture is established and defined by the board of directors and management; however, all employees contribute to culture and multiple cultures exist within every organization.
Occupational fraud, or fraud committed by an employee against the employer, can be directly impacted by the culture of the organization. Developing a culture of ethical behavior is imperative for effective risk mitigation, compliance, fraud prevention, and detection.
Characteristics of healthy culture
The Institute of Internal Auditors identified five characteristics of a healthy culture. A healthy culture, rather than a toxic one, can mitigate and deter unethical or illegal behavior. If your organization does not exhibit all these characteristics, consider what changes can be made to shift your culture into the healthy category:
- Ethical tone at the top
- Clearly defined values
- Teamwork and collaboration
- Honesty and transparency
- Ownership and accountability
Developing a culture of fraud prevention
According to the Association of Certified Fraud Examiners
(“ACFE”), a typical organization loses 5% of its revenue annually due to fraud. Many organizations have a zero tolerance policy for fraud, but it’s not enough to place posters in office common areas. Fraud can never be completely eliminated, and without planned, intentional actions to prevent fraud, the likelihood of successful fraud attempts may increase. Consider these actions to help deter fraud:
- Establish an ethical tone at the top, which exhibits a commitment to honesty and integrity
- Create clearly defined Code of Ethics and Conflict of Interest policies
- Perform a fraud risk assessment to identify incentives, opportunities, and rationalizations
- Implement effective controls to mitigate identified risks
- Provide a safe mechanism for reporting violations, such as a whistleblower hotline
Do you need help assessing the impact of your organization’s culture as it relates to fraud prevention? EisnerAmper has a depth of resources to help prevent, investigate, and analyze fraud perpetration. Contact us today to find out how we can assist.