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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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Still, we as a profession have trouble selling our message or, in the current corporate vernacular, proving we add value. Why is this? One reason may be the inherent nature of organizations. They have been described as resistant to change—both by tendency and to some degree by design—and as being subject to a variety of pressures and influences that affect their objectives and strategies.8 They are also characterized as having a near-obsession with a short-term, quantitative, bottom-line mentality.9 Finally, they eschew matters incapable of precise measurement or ones that extend into the distant future.10
FRAUD EXPOSED
Courtney Thompson has suggested that some of the reasons organizations are not more aggressive and more effective in addressing fraud in the workplace has to do with at least three factors. The first is that the most effective frauds are those that can be explained away as errors. This provides highly effective cover for the person(s) committing the fraud and an excellent rationale for management to not pursue it further and have to potentially deal with hurt feelings and sticky questions. The second reason is that some cases are difficult, if not impossible to prove. This may be true even if an experienced fraud investigator is involved. Issues of cost can come into play, as well.
Yet at the same time, organizations by their very nature are susceptible to fraud. Diane Vaughan, writing of corporate crimes, opines that they are facilitated by the following organizational characteristics: formal structures and mechanisms; intricate and specialized reporting and processing systems; a high reliance on trust; and general, rather than specific, systems of monitoring.11 She notes that especially when one or more of these elements is combined, the possibility of corporate fraud may be enhanced because complex events within complex systems may be difficult to detect and track. From our perspective, I believe we may say the same thing about occupational fraud. The modern organization presents an almost ideal environment for those so inclined to carry out unlawful acts, for their deeds will often also be difficult to detect and track. Further, as Vaughan notes, a prevailing need for trust provides fertile ground for those inclined to abuse it for personal gain.
Also, note Shover and Wright, some organizations breed a culture that makes them ripe for abuses—either by them against others in the case of corporate crime or, in my view, by others against them in the case of occupational fraud. They believe corporate misconduct is more likely in an environment where “rationalizations, excuses, and justifications for illicit behavior... increase the odds of criminal choices.”12 So, too, I would argue does this culture make individual wrongdoing more likely against the organization.
This may be particularly true when the language of the organization operates to mask the true nature of given acts. Authors Hochstetler and Copes have theorized that euphemisms and codes and doubletalk may be invoked to make the unpleasant more acceptable and the illegal less onerous when organizational members are breaking the law in the commission of a crime to benefit the organization. They see these mechanisms as contributing to what they call a “criminogenic organizational culture,” which operates to deny responsibility, deny the fact of injury being inflicted, minimize the existence of any true victims, condemn the condemners when actions are challenged, and serve higher loyalties such as the betterment of the company by virtue of the very acts undertaken.13 If such mental representations allow the individual to pursue misdeeds on behalf of the company, we need not think too strenuously to conceive of how at least some of these rationalizations could be bent to justify acts against the company as well.
THOUGHTS ON OCCUPATIONAL FRAUD
James Coleman, for example, has not only cited the need for additional research into the causes of white-collar crime, but has also opined on how rationalizations and the “everybody is doing it” mentality can operate to neutralize what would otherwise be the stigma of white-collar crime.14 He further notes that due to the intricacies of cultural determinants within an organization, “work-related subcultures are often able to maintain a definition of certain criminal activities as acceptable or even required behavior; when they are clearly condemned by society as a whole.”15 Again, although Coleman is speaking of corporate crime, it is but a small step to see these mechanisms justifying occupational fraud as well. Yet, even in the face of such apparent vulnerabilities, the issue of the cost of prevention and detection remains.
In my experience, I believe most occupational fraud cases can be solved. Whether they can be solved in a cost-effective manner, where the cost of the inquiry is less than “X” percent of the possible loss, is another question entirely. This is a significant concern to most organizations, and is one of the major reasons more workplace frauds are not resolved. Some organizations and executives, a minority to be sure, take the position that any fraud against them is intolerable and will be pursued vigorously regardless of the cost relative to the loss. Their theory is based on, as best I can ascertain, one of two elements, or perhaps some combination of the two: (1) a personal “Don’t mess with me, pal” attitude, and (2) sending a message that if you are thinking about trying something in this organization, you better realize you will be pursued. It would be interesting to see research on the long-term economic efficacy of these tactics.
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