question archive Assume you are in a leadership role in a company and the board of directors has tasked you with a critical responsibility
Assume you are in a leadership role in a company and the board of directors has tasked you with a critical responsibility
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Assume you are in a leadership role in a company and the board of directors has tasked you with a critical responsibility. During the past year, your company has discovered three major frauds. The first was a $3.9 million theft of inventory that has been going on for six years that was committed by several employees in the shipping department. The second was a $2.8 million kickback scheme involving the most senior purchasing agent. She had been allowing certain customers to overcharge for products in return for personal payments and other inappropriate financial favors. The third was as overstatement of receivables and inventories by a subsidiary manager to enhance reported earnings. Without the overstatement, his unit's profitability would have fallen far short of budget. The amount of overstatement has yet to be determined. All three of these frauds have been disclosed to regulators, reported in the media, and embarrassing to the company. In response to these incidents, the board of directors has demanded that management take "positive steps to eliminate future fraud occurrences." In their words, they are "sick and tired of significant hits to the bottom line and negative exposure in the press." The responsibility to develop a program to eradicate fraud has fallen on your shoulders. 1. Outline a high-level plan to prevent future frauds that includes a fraud risk assessment. 2. In addition, in devising your strategy, outline the roles that each of the following groups will play in preventing fraud in the organization: • Senior management • Middle management • Internal audit • Corporate security/Internal investigations group • Audit committee • Legal counsel
