Internal Auditors Speak Out on Controlling Employee Fraud

Abstract

The purpose of this chapter is to investigate what internal auditors see as a need for improvement regarding current business risk practices for controlling employee fraud. A survey of internal auditors compares perceptions of current versus desired situations in regard to six common practices of employee fraud risk management: training in fraud risk management, understanding how job procedures are designed to manage fraud risks, recognizing basic indicators of fraud, providing appropriate employee compensation incentives, reporting suspicions of fraud, and background verification of job applicants. Comparisons for each practice are made between the United States and Canada.The main finding is that the largest weakness in the employee fraud risk management practices relates to providing employees with training in their risk management programs. Seemingly related deficiencies are also indicated in both employee understanding of how their job procedures are designed to manage fraud risks and the ability of employees to recognize basic indicators of fraud. No measure of fraud prevention is more important than those involving the employees who actually conduct the affairs of an organization. The identification and ranking of gaps in employee fraud risk management practices can be used to make a case to deal with areas needing improvement.

Citation

Zanzig, J.S. and Flesher, D.L. (2011), "Internal Auditors Speak Out on Controlling Employee Fraud", Jeffrey, C. (Ed.) Research on Professional Responsibility and Ethics in Accounting (Research on Professional Responsibility and Ethics in Accounting, Vol. 15), Emerald Group Publishing Limited, Leeds, pp. 225-250. https://doi.org/10.1108/S1574-0765(2011)0000015011