Controls! One Key to Preventing Fraud (4 of 7)

The first step to prevent fraud is to ensure that controls are in place. These controls may be as simple as having background checks performed on people working with the financial department of the organization.

The following are some examples of preventative controls, but they are not all-inclusive.

* Creating a Culture of Honesty and High Ethics
It is the organization's responsibility to create a culture of honesty and high ethics and to communicate clearly acceptable behavior and expectations of each employee. Such a culture is rooted in a strong set of core values (or value system) that provides the foundation for employees to know how the organization conducts its business ethically.

*Setting the Tone at the Top
Board of Directors, officers, pastors and leaders of an organization set the "Tone at the Top" for ethical behavior within their organization. Research in moral development strongly suggests that honesty can best be reinforced when a proper example is set--sometimes referred to as the "Tone at the Top." The management of an entity cannot act one way and expect others in the entity to behave differently.

Management must show employees through its words and actions that dishonest and unethical behavior will not be tolerated, even if the result of the action benefits the entity. Moreover, it should be evident that all employees will be treated equally, regardless of their position.

For example, statements by management regarding the absolute need to meet operating and financial targets can create undue pressures that may lead employees to commit fraud to achieve them. Setting unachievable goals for employees can give them two unattractive choices: fail or cheat.

So how can management create a positive workplace environment? Tune in to Post#5.