There is not enough government oversight of corporate finances. The attached report recommends that all companies be required to implement fraud prevention programs, be audited using a new approach to detect material fraud, have a fraud specialist participate in the audit and have certain individuals within the corporation attend annual anti-fraud training.
Based on the number of cases the FBI has been actively involved in since the alleged fraud incident at Enron Corp., these additional actions would reduce the opportunity for fraud in companies.
Melanie A. Harris
Dr. Donna Maria Blancero
BUS 303-Case Study
19 April 2004
New Ideas For Corporate Fraud
Corporate fraud occurs in almost every business today. According to the Association of Certified Fraud Examiners (ACFE) 2002 Report to the Nation on Occupational Fraud & Abuse it accounts for approximately 6 percent of revenues or 600 billion dollars annually (SmartPros Editorial Staff). For this reason alone, I feel that there should be more oversight over corporate finances. President Bush's proposal may help but does not solve the problem. There are other actions that need to be taken.
Since the Enron Corp. scandal the FBI has about ten times the caseload they had prior of suspected fraud. They are opening three to five investigations a month of suspected fraud of 100 million dollars or more (Caffrey). This has only shown the public that corporate fraud will continue despite all of the laws that are passed.
One of the latest examples of fraud is Martha Stewart's well-timed sale of ImClone Systems stock on Dec. 27, 2001. She sold her shares of the stock one day prior to the Food and Drug Administration issuing a negative ruling on an ImClone drug, which caused the price of their stock to drastically sink. It was said she was tipped off by her former stockbroker who was told about the ruling by the founder of ImClone ("Martha Stewart Found Guilty in Stock-Fraud Trial"). It is cases of high-profile individuals like Martha Stewart that continue to prove to the public that something has to be done.
Since then, President Bush has signed the Sarbane-Oxley Act 2002 which imposed stricter standards and increased oversight for corporate accounting by requiring greater transparency and disclosure of corporations financial status and transactions ("President's Ten-Point Plan").
President Bush's plan has helped but it hasn't solved the problem. Passing a law does not make something like corporate fraud disappear. It only puts pressure on certain individuals such as accountants and auditors. We need to focus on detecting and preventing it. Therefore, the ACFE is suggesting that all companies be required to implement fraud prevention programs, be audited using a new approach to detect material fraud, have a fraud specialist participate in the audit and have certain individuals within the...