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Fraud Exprosed Whot you Dont Could Cost your company millions - Joseph W.

Joseph W. Fraud Exprosed Whot you Dont Could Cost your company millions - Wiley Publishing, 2003. - 289 p.
ISBN: 0-471-27475-5
Download (direct link): fraudexposedwhatyoudont2003.pdf
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At least on an international level, the utility and worth of the forensic profession seems to be gaining in acceptance and recognition. The Ernst & Young study of more than 10,000 international organizations and their exposure to fraud, released in 2000, is reported to have found that of those respondents who used forensic professionals to address issues in their organizations, 80 percent were pleased with the results.34 While this obviously implies that 20 percent either were not pleased or did not respond to the question, it appears to compare favorably with many of the comments often heard about client satisfaction with outside professional service providers.
Even for the conscientious and energetic board member or executive officer, the task may be becoming increasingly difficult. Some executives are already expressing their frustrations at trying to manage the flow of data concerning business operations scattered widely throughout the globe. The increasing use of computers that can instantaneously amass and transmit reams of data may only exacerbate this information deluge.35
Because of technology and public sentiment, the number of potential allegations against once-sacrosanct corporate seniors may be growing. Shortly after the Enron scandal broke, one member of Congress who was interested in the matter had his staff create an Enron Tip Line Web page. A number of leads came into this site, including one of the first allegations that Enron’s auditors may have been destroying documents. The FBI, the National White Collar Crime Center, and the Software Business Alliance also operate tip line Web sites, as do several groups interested in other forms of criminal activity.36 The director of enforcement for the SEC, Stephen Cutler, noted recently that since the Enron controversy the online complaint center of that agency received an average of 525 e-mails
THE NEXT FIVE YEARS
per day, up 45 percent from last year’s average volume. He also noted that on February 5, 2002, the agency received 763 e-mail alerts to possible fraudulent activity—a record.37
As mentioned previously, the forensic professional may increasingly be in the difficult position of the Roman god Janus, who had two faces, one looking forward and one looking back. We can do little about how senior executives are chosen, but we may be called on in the future to monitor more closely how they act. At this writing, the pressures pushing in this direction are clear and growing. Unions, whose huge pension funds are heavily invested in corporate America, have both a clear financial interest in the well-being of these investments and, by the rationale of their existence, a long-standing distrust of corporate management. After a recent meeting about such issues, The Wall Street Journal made the following observation:
Investors, including public funds, “let down their guard” during boom years, says Richard Trumka, AFL-CIO secretary-treasurer. But no longer, he says. About 30 public-fund trustees over the weekend heard from AFL-CIO officials about executive compensation, Wall Street research and corporate conflicts of interest.38
The possibility, indeed likelihood, of the need for increased scrutiny is also coming from other sources as well. The Wall Street Journal also reported on high-level deliberations within the Bush Administration in the wake of the Enron situation, noting that the Administration was seeking alternatives to increase officer and director responsibiltity when shareholders were mislead, even if this was the result of carelessness rather than actual malfeasance. The story further reported Treasury Secretary Paul O’Neill cautioning corporate executives that they would now be held to a standard of negligence that is more encompassing than in the past. Essentially, the standard goes beyond the commission of a wrongdoing and would now include the failure to become aware of a wrong-doing.39
Such sentiments may also be shared by the public at large. A Wall Street Journal/NBC poll has shown that 57 percent of respondents said that corporate leaders’ standards and values have dropped in the past 20 years, as opposed to 38 percent who said they either rose or stayed the same. This represents a sharp departure from views expressed just four years ago, when 53 percent of respondents rated corporate leaders’ standards as being the same or higher than in the past. Perhaps even more telling, fully 60 percent of professionals and managers— persons familiar with the business landscape—said business standards today are lower. Such sentiments may also have political consequences. Forty-nine percent of persons polled in the survey favored increased government regulation of business practices, as opposed to 39 percent who did not.40
Corporate and organizational boards are not deaf to such concerns, at least for the time being. The Wall Street Journal reports that many boards and board
FRAUD EXPOSED
members are actively seeking outside professional assistance to help educate and guide them in the pursuit of their duties. Some boards are even setting up dedicated Web sites for this purpose, to increase their awareness of company activities, to improve their access to management, and to be able to ask questions in a more rapid and efficient manner.41
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