Anti-Fraud Controls, Ethics and Corporate Compliance Programs

Fraud is expensive! The Association of Certified Fraud Examiners (ACFE) estimates that fraud costs companies about 5% of its annual revenue. Applied to the estimated 2009 Gross World Product, this figure translates to a potential total fraud loss of more than $2.9 trillion. (source: ACFE's 2010 Report to the Nation on Occupational Fraud and Abuse). As a result, fraud prevention should be on all companies radar screen. It is a ripe target to improve net operating income by increasing top-line revenue and limiting expenses due to asset misappropriations, corruption and fraudulent financial statements.

Another powerful motivator for strong anti-fraud controls is that companies with effective compliance programs addressing fraud are given a break under the U.S. Sentencing Guidelines if fraud is discovered. It provides a line of defense showing that internal wrongdoers are the exception at the company. Candela Solutions can help establish an effective compliance program and recommend fraud prevention techniques to tackle high risk fraudulent activities.

It is Ultimately the Culture that Rules

Ethics plays a central role in strong governance. While most companies understand business ethics, few understand the effort it takes to execute an efficient and effective ethics policy. In addition, organizations of all types are subject to Chapter 8 of Federal Sentencing Guidelines which require due diligence to prevent and detect criminal conduct as well as a culture that encourages ethical conduct and a commitment to legal compliance. Yet, many organizations do not fully understand these guidelines or the potential ramifications in the event fraud occurs. Unfortunately, ethical temptations are a reality leading to a wide range of risks.

While fraud prevention can never be an absolute guarantee, Candela Solutions offers a wide range of services to help promote ethical behavior and mitigate the risks of fraud.

• Assessing control environments, including "tone at the top"
• Development of fraud-prevention and corporate-compliance programs
• Establishing and updating codes of conduct
• Enhancing controls to address the fraud triangle of opportunity, motive and rationalization
• Training board members, management teams, and staff

Organizations without a clear code of ethics are at risk. A code of ethics is simply a centralized guide towards helping an individual's actions remain consistent with the mission, values and principles of an organization. It is integral to the strategic plan, internal controls and culture of a business. Candela Solutions can assess your code of ethics both in terms of regulatory mandates and best practices. However, the written word only goes so far as the more important elements are culture, controls, and consequences.

Corporate Compliance Programs as a Reality

An effective corporate compliance program can go a long way in reducing fines and penalties under Federal Sentencing Guidelines in the event that fraud occurs. Minimum requirements under these guidelines are:

• Governing authority to be knowledgeable of organization's compliance and ethics program, and exercise oversight regarding effective implementation.
• High-level personnel assigned overall responsibility.
• Organization must provide adequate resources.
• Reasonable efforts to protect against unethical people to oversee the compliance & ethics program.
• Effective training and disseminating information regarding individuals' roles and responsibilities.
• Expressly requires the use of auditing & monitoring to ensure that applicable internal controls work.
• Evaluate effectiveness periodically of the organization's compliance and ethics program.
• Have and publicize a system for the organization's employees and agents to report or seek guidance regarding potential or actual criminal conduct without fear of retaliation.

Call upon us to help build your corporate compliance program!