When we present on fraud, one of the most common questions we’re asked is: “What can my organization do to prevent fraud from happening?” The answer is to have proper controls and fraud prevention measures in place. However, implementation challenges arise when faced with management resistance.
The Association of Certified Fraud Examiners (ACFE) Fraud Examiners Manual recognizes that management often doesn’t view fraud as a concern. This may be because fraud typically happens unseen and losses go undetected, which can create reluctance to implement controls or allocate resources to combat fraud.
Management may also be concerned that addressing fraud can have a negative effect on employee morale. In these cases, it may be helpful to remind management that most employees want to work for an honest company. Understanding the importance of fraud prevention can save companies from actual dollar losses—estimated at 5 percent of revenue—and negative publicity, which can hurt the bottom line.
Reminding management to consider these factors may encourage them to implement effective controls and fraud prevention measures.