Introduction
Corporate fraud refers to illegal activities undertaken by an individual or company that are done in a dishonest or unethical manner. It is a clear example of white collar crimes since it is financially motivated and committed by individuals in positions of influence to quench their vested interests. The case of Enron can be used as an example of corporate fraud and how such activities can bring the biggest corporations to their knees. Jeffrey Skilling and Kenneth L. Lay were the chief executives at Enron when the company was faced with conspiracy and fraud allegations which the two were found guilty of. According to Mahama (2015) the Enron debacle in 2001 is one of the greatest corporate economic fraud to hit the United States. In his proposal, Mahama (2015) argues that structures should be put in place to detect fraud cases early enough to warn investors and regulators before severe damage is recorded.
Victim Assistance Program
The victim assistance program can be adopted by companies to detect corporate fraud cases among their top executive early enough to ensure that immediate action is taken against them. According to Tillman & Pontell (2016) the absence of reliable data makes it very difficult pinning down the actual impact of corporate fraud. Nonetheless, the estimated annual cost of white collar crime in the United States is approximately $380 billion (Tillman & Pontell, 2016). The huge figure shows that many cases of corporate fraud are either not reported or fail to receive significant publicity. Corporate fraud can manifest in a number of ways. The most common include asset misappropriation which accounts for majority of the cases, corruption and financial statement fraud. Financial statement fraud often has the most significant impact among investors and other stakeholders since it leads to lost trust and business. Therefore, a program to assist companies to control corporate fraud should focus on educating employees about cases of corporate fraud, regular and unbiased investigation, and proactive prevention.
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Educating Employees on Corporate Fraud
Strong corporate fraud policies are needed before starting employee training on the subject. Many corporate fraud cases are identified and controlled before reaching a critical because of tip offs from employees. Therefore, a comprehensive training program should be put in place to create a culture anchored on honesty, transparency and openness and also to ensure that employees can report such cases without fear of victimization. Cohen et al. (2010) argues that manager’s activities and behavior plays a cardinal role in cases of corporate fraud. Therefore, employees should be trained to avoid caving in to unethical demands especially on financial issues. Employee training should focus on a number of issues and areas. First, it should help employees easily identify cases of corporate fraud. The employees should be cognizant with the consequences that follow such activities. Employees should also be trained on corporate ethics. In the case of Enron highlighted above, the top executives took advantage of their position to execute corporate fraud. The activities depicted lack of corporate ethics. Employees should be trained to adhere to company policies when faced with such situations. Ethical reporting should be included in the training. Employees should be in a position to report cases of corporate fraud and even file for legal intervention if they fear victimization from the top management.
Proactive Prevention of Corporate Fraud
Companies rush to control corporate fraud when the damage has already been done. Installation of string anti-fraud policies and inclusion of anti-fraud professionals can play a major role when addressing such cases. According to Soltani (2014) inefficient corporate governance and control mechanisms appears to be the major problem among companies experiencing cases of corporate fraud. Since managers and executive officers often collaborate when executing corporate fraud, it becomes extremely hard identifying the cases of hiring unbiased professionals to identify the cases. However, when anti-fraud structures are well-laid, it is easy noting irregularities and reporting them. Companies also prefer having a decentralized management system to ensure that the function of different top managers is dissolved. Working with fraud experts may call for independent investigation from different companies to establish whether they will give similar reports and concern. The company should also install latest anti-fraud controls to ensure that probable cases are reported before they progress in a crisis.
Investigating Corporate Fraud
Technology has made it easier controlling corporate crime. Companies are entrusting some passwords with specific individuals to make it easier tracing cases of corporate fraud when they present. Furthermore, money transactions are highly regulated by the government and internal company controls. However, investigation remains an important element among companies to identify cases of corporate fraud and stop them in time. According to Yahnke (2019) looking into every report offers whistle blowing tips and also helps when exploring new reporting procedures to install in the company. Anonymity should be offered when investigating or reporting. Employees should understand that their activities are closely monitored to avoid engaging in corporate fraud.
Conclusion
Corporate fraud is one of the most common manifestations of white collar crime in the 21st century, Companies like Enron collapsed since they failed to identify corporate fraud at the right time. The program proposed in this proposal focuses on three areas: employee education, corporate fraud investigation and proactive prevention. The program involves arming employees with ethical principles to identify and report cases of corporate fraud. The company should also hire anti-fraud professionals to advice on the right structures and procedures to put in place to identify and curb corporate fraud.
References
Cohen, J., Ding, Y., Lesage, C., & Stolowy, H. (2010). Corporate Fraud and Managers’ Behavior: Evidence from the Press. Journal of Business Ethics, 95 (S2), 271–315. https://doi.org/10.1007/s10551-011-0857-2
Mahama, M. (2015). Detecting corporate fraud and financial distress using the Altman and Beneish Models: The case if Enron Corp. International Journal of Economics, Commerce and Management, III (1), 1-18.
Soltani, B. (2014). The anatomy of corporate fraud: A comparative analysis of high profile American and European scandals. Journal of Business Ethics, 120, 251-274.
Tillman, R. H. & Pontell, H. N. (2016, June 29). Corporate fraud demands criminal time. New York Times. https://www.nytimes.com/2016/06/29/opinion/corporate-fraud-demands-criminal-time.html
Yahnke, K. (2019, July 2). Corporate fraud prevention: The ultimate guide. I-Sight.
https://i-sight.com/resources/corporate-fraud-prevention-the-ultimate-guide/
