New Ideas for Corporate Fraud/Should there be more government oversight of corporate finances?

EXECUTIVE SUMMARY

        There is not enough government oversight of corporate finances. The attached report recommends that all companies be required to implement fraud prevention programs, be audited using a new approach to detect material fraud, have a fraud specialist participate in the audit and have certain individuals within the corporation attend annual anti-fraud training.

        Based on the number of cases the FBI has been actively involved in since the alleged fraud incident at Enron Corp., these additional actions would reduce the opportunity for fraud in companies.

Melanie A. Harris

Dr. Donna Maria Blancero

BUS 303-Case Study

19 April 2004

New Ideas For Corporate Fraud

        Corporate fraud occurs in almost every business today. According to the Association of Certified Fraud Examiners (ACFE) 2002 Report to the Nation on Occupational Fraud & Abuse it accounts for approximately 6 percent of revenues or 600 billion dollars annually (SmartPros Editorial Staff). For this reason alone, I feel that there should be more oversight over corporate finances.

President Bush's proposal may help but does not solve the problem. There are other actions that need to be taken.

        Since the Enron Corp. scandal the FBI has about ten times the caseload they had prior of suspected fraud. They are opening three to five investigations a month of suspected fraud of 100 million dollars or more (Caffrey). This has only shown the public that corporate fraud will continue despite all of the laws that are passed.

        One of the latest examples of fraud is Martha Stewart's well-timed sale of ImClone Systems stock on Dec. 27, 2001. She sold her shares of the stock one day prior to the Food and Drug Administration issuing a negative ruling on an ImClone drug, which caused the price of their stock to drastically sink. It was said she was tipped off...