1) Yes, a good internal control system could play a excellent role in preventing the fraudulent backdating practices through:
a) Keeping the documents of issue the stock options to the officials and directors.
b) Reconciling the options issued and allotted along-with the date of activities.
c) The internal control is not under the control of a individual officer or director, so it would be difficult to overpower the controls of the department.
d) Internal control department can detect the reason of fraud happening at the first opportunity or catching of fraud. Therefore, there is chance for the employees to commit the frauds again and again.
e) The Internal control department not only detect the frauds, but also bring out with preventing steps.
2) The executives and directors of many companies have allowed the dishonest “backdating” practice in their companies because in each and every case, one or the other operation controller is involved in the fraud to provide space for such a fraud to happen through his/her authority. Secondly, the allowing executives and directors are of the view that company is providing the options at lower prices and the market prices are not in their hand. So, the profit or loss on selling the shares at higher prices in market by employees is the employees’ individual game and company has nothing to do with that.
3) Yes, a whistle-blower system would help to detect and prevent these dishonest practices of “backdating” by executives and directors of the board because the frauds can be early and easily be detected at the work place so an employee who is working in the system can find out the fraud happening. The whistle-blower system is the active human work-force which raise voice against the fraudulent activities happening in the organization. This system awake all the forces to fight against the fraudulent activities. All this is because every employees life style is attached with the life-line of the company. If company exists, the employee exists and the frauds kills both company and the employee. So, the whistle-blower system should be encouraged in the organizations.
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