– April 22, 2013 – Plante Moran, one of the largest certified public accounting and business consulting firms in the nation, has offered guidance and best practices for companies to protect against fraud.
According to the Association of Certified Fraud Examiners, or ACFE, the typical organization loses 5 percent of its revenue to fraud each year.
“One of the most effective ways to detect and deter fraud is to educate employees about what constitutes fraud,” said Michelle McHale, senior manager of Plante Moran’s Forensic and Valuation Services. “Employees should understand how fraud harms everyone in the organization and how to report questionable activity.”
Plante Moran advises companies, large and small, to follow these fraud-reducing guidelines:
- Give employees a variety of methods to report their concerns about fraud, illegal actions or unethical behavior, including telephone hotlines, emails, web-based portals, faxes or even face-to-face meetings. Anonymous reporting, either internally or through independent service providers, can help employees feel their information has been shared in a safe and confidential manner.
- Educate employees about fraud and how it affects the company. They may be more likely to use the services once they are aware of how fraudulent behavior personally affects them.
- Empower employees to utilize the services. There could be a negative stigma attached to whistleblowing, but encouragement from senior management as well as ongoing training and support from the organization may ensure a more robust fraud reduction program.
Fraud hotlines are independent, anonymous and available 24 hours a day, 365 days a year. This business solution provides a powerful deterrent to fraud, dishonesty, corruption and other inappropriate behaviors. Annual costs to operate a hotline typically range up to $1.50 per employee. According to an ACFE study, implementation of hotlines contributed to an approximate 44 percent reduction in fraud losses.
The independence and anonymity of hotlines helps remove the fear of retaliation, which can be a deterrent in reporting suspicious or fraudulent behavior. The 2011 National Business Ethics Survey showed that 22 percent of those who reported misconduct say they experienced some form of retaliation in return.
“Employees are the primary source for reporting fraud,” McHale said. “Senior management should maintain an open door policy and effective communication channels for reporting employee-related concerns.”
Organizations benefit from fraud detection services that protect both their assets and its reputation. Hotlines show a company’s commitment to honesty, integrity and strong governance and provide executives an opportunity to address sensitive issues internally and proactively before the behavior irreparably harms the organization.
“Providing employees with a tool to anonymously report policy violations and inappropriate behaviors sends a clear signal that management is committed to the elimination of dishonesty in the workplace,” she said.
Sarbanes-Oxley mandates that publicly traded companies provide outlets for employees to anonymously report information relating to financial irregularities and has encouraged other organizations in different industries to implement means of reporting fraudulent behavior as well.About Plante Moran, PLLC
Plante Moran is among the nation’s largest certified public accounting and business advisory firms, providing clients with tax, audit, risk management, financial, technology, business consulting, and wealth management services. Plante Moran has a staff of more than 2,000 professionals in 21 offices throughout Michigan, Ohio, and Illinois, with international offices in Shanghai, China; Monterrey, Mexico; and Mumbai, India. Plante Moran has been recognized by a number of organizations, including FORTUNE magazine, as one of the country’s best places to work.