Preventing Fraud at Mogels Inc. - 1040 Words

1) The Committee of Sponsoring Organizations of the Treadway Commissions (COSO) declared in 2011 that keeping a moral tone is an effective way for organizations to prevent fraud. The values, integrity and competence of the company’s leaders and the presence of a positive management philosophy encourage low-level employees to be honest and morally upright (COSO, 2011). When employees observe that executives behave unethically, they become more likely to engage in fraudulent behavior because they see that it is tolerated. Mogel’s Inc. could establish control through a code of conduct covering all employees. The presence of formal policies can only be effective when it is properly and consistently enforced and when competent and trustworthy individuals are rewarded (McNeal, 2011) 2) Mogel’s Inc. can also benefit from an organizational structure that clearly denotes company hierarchy. Employees should pass reports to their supervisors or give formal updates of the company’s processes. For instance, it would be ideal for an internal auditor to regularly report to an audit committee. Relevant information would freely flow from employees to the company’s management and this raised level of awareness is a deterrent for fraudulent activities which flourish when supervision is low (McNeal, 2011). A clear organizational structure encourages transparency in a company. It also informs employees of the people they can report to if they suspect that anything is amiss. (McNeal, 2011).