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Elements of an effective fraud policy
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Fraud can be generally be defined as use of deception with the intent of making personal gains or causing loss to another person or an organization. There are many types of fraud such as those committed by employees against employers, businesses against customers and investors and other forms of fraud. In order to curb cases of fraud, businesses must come up with appropriate fraud policies. This letter will give in detail the elements of an effective fraud policy.
According to Dawson (2015), an effective fraud policy should have a policy statement. A policy statement outlines the core responsibility of the management to prevent or detect cases of fraud in the organization. The management should be aware of the types of fraud which are likely to occur within their organizations and implement appropriate measures for prevention and detection. The management cannot delegate this task to outside parties since it is an integral part of the business for which they ought to take full responsibility.
An effective fraud policy should clearly outline the investigation parties to take part during cases of suspected fraud. The parties concerned may be the owners or audit committee. This element also outlines the appropriate protocol to be observed during investigation, for instance, the necessary documentation required. Lastly, the element provides details relating to prosecution of alleged fraud. Legal counsel should be considered by the management in case of suspected fraud. It is worth noting that the management is only supposed to consider investigating alleged fraud following a reasonable cause to do so (Dawson, 2015).
A fraud policy should have guidelines on protection of whistle-blowers or those who report incidences of fraud against retaliation. Individuals who report fraud should be protected against harassment and other forms of aggression they may encounter as a result of exposing fraud. The policy should outline the measures whistle-blowers can take in case of harassment after reporting fraud. The policy should also deter the management from treating the whistle-blower differently after reporting fraud. Nonetheless, the law is not entirely clear on whistle-blowers and management should seek legal counsel when such cases arise (Dawson, 2015).
Acting in good faith
An effective fraud policy should outline the consequences of making malicious claims against the company especially in relation to fraud. Employees should not make malicious claims in relation to fraud due to self interests or other motivations. Employees can check on the actions of other employees or even the management and report cases of fraud. Giving false information is against the law and hence organizations should be safeguarded against malicious allegations that may damage its reputation. Employees who make malicious allegations against the company should face appropriate disciplinary action as outlined by the fraud policy.
Authorization for investigation
A fraud policy should make provisions for the investigation protocols to be followed once fraud is suspected. This element requires that those involved in the investigation be granted full access to files, premises, personal property, company records and other relevant areas which can help them acquire information on suspected fraud cases. Investigators must be given full authority to access the premises as well as the records in order to conduct a thorough and meaningful investigation. Even though an employee may presume the workplace as private area, investigators should be allowed to carry out investigations so as to find sufficient evidence which can be used in court. Employees should be aware that during investigations, investigators should be granted access to everything including e-mails (Dawson, 2015).
An effective fraud policy should outline the code of conduct in the organization. The code of conduct outlines the corporate values and expected behaviors in the organization. Codes of conduct should be written using a common language that every employee can easily understand. In case of multinational organizations, the codes of conduct should be appropriately translated to fit the multiple cultures and languages. The codes of conduct should also relate to the specific industry in which the organization fits.
An effective fraud policy should provide appropriate guidelines on training and education of employees concerning fraud. Employees should be given training on corporate values and the organization’s code of conduct. This enables them to know what constitutes wrongful acts. Employees should know the appropriate procedures to use in reporting fraud which should be enhancing through training. Training should also cover legislative awareness for instance, antitrust laws, money laundering, and anti-bribery awareness. Training can either be conducted online or be delivered by a qualified instructor.
Fraud reporting policy
This element ensures that appropriate fraud reporting mechanisms are in place especially those concerned with whistle-blower protection. It also protects the alleged persons from harassment either by the employees or management. Employees should not attempt to conduct their own investigations but rather allow the anti-fraud investigators to do so. Employees should not confront the suspects but rather pave way for investigations by professionals and let the law take its course (Dawson, 2015).
It is imperative that an effective fraud policy should contain all the aforementioned elements. An effective fraud policy guides employees on what is right or wrong. It also provides guidelines on the procedures to follow once fraud is suspected. An effective fraud policy thus not only tries to curtail fraud, but also issues guidelines on what to do in case of suspected fraud.
Dawson, S. (2015). Internal control/anti-fraud program for the small private business: A guide for companies not subject to the Sarbanes-Oxley Act. New Jersy, NJ: Wiley.