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The article Analyzing Organization Fraud from the publication The Internal Auditor by the Institute of Internal Auditors summarizes the results of four surveys by four organizations the Committee of Sponsoring Organizations of the Treadway Commission COSO KPMG International Cooperative KPMG the Institute of Management and Administration IOMA and The Institute of Internal Auditors IOA jointly and Ernst Young Global Limited Ernst Young reviewing organizational fraud detection and deterrenceThe combined findings are that of all types of fraud the most common is financial statement fraud committed by top officers of the company 43 of the time the Chief Financial Officer CFO and 72 of the time the Chief Executive Officer CEO Carpenter Mahoney 2001 Additionally fraud is more likely in an organization which is dominated by grey directors this is management relatives suppliers contractors and consultants and retired executives that have influence over the operation of the company Carpenter Mahoney 2001All four surveys found that fraud usually occurs as a result of poor internal controls 58 of the time or management overriding what controls do exist 36 of the time Carpenter Mahoney 2001 The most effective way to prevent fraud is to set a strong tone from the top that is to set a top management subculture that is strongly anti-fraud Carpenter Mahoney 2001 and to have a strong internal audit department Albrecht Albrecht Albrecht Zimmelman 2009 that is on the lookout for red flags that might indicate fraudulent activity Carpenter Mahoney 2001The fact that top-level executives are so frequently involved in fraudulent activity is strongly correlated to organization culture the subculture of top management has such a strong influence over the culture of the rest of the organization Athabasca University 2005 that lower managers and staff are hesitant to go against the perceived social order when told to do something that may directly or indirectly allow a higher level employee to commit some fraudulent activity Trice
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