Question

Establishing a culture of integrity is a critical component of fraud control, in a multinational corporation how will you, in your position as a new CFO, influence the corporate structure to improve the moral culture of the organization and use as detection and prevention controls?

Answer 1

Integrity is very crucial component for an entity's persistent survival. The duty to comply with it rests with every individual of the organization. However, as a CFO of the company following points may be established to influence the moral culture of the organization:-

1. Segregation of duties:- At the corporate structure level the duties would be assigned in such a way that no person is the authoriser and responsible for executing the same job. There should a pre established hiearchial level for approving transactions beyond a pre defined monetary value ensuring there is no override of control.

2. Rotation of duties:- The duties of an individual should be rotated at predefined intervals, say semi annually or annually so that an individual is not in a position to have whole control the activity. This would minimize the likelihood of opportunities of an individual to engage in fraud.

3.Establishment of whistleblower policy:- There should be an establishment of whistleblower policy wherein the person who either detects immoral behaviour or practices can directly reach to higher managerial levels to report a concern and seek redresal for the same.

4. Imparting more powers to audit commitee :- The involvement of audit committee should be increased in financial transactions involving related parties. There should be an establishment of charter stating the transactions requiring prior approval of audit committee. This may include transactions beyond a monetary threshold, controls round corporate assets to be overviwed by committee, approving unusal business transactions.