Management's Responsibility Regarding Fraud

Management is responsible for the organization’s actions, conduct and performance. Their primary objectives are to give relevant, reliable, and credible financial and operational information, make effective and efficient use of the organization’s resources, safeguard the organization’s assets, comply with laws, regulations, ethical and business norms, and contracts, and lastly they have to identify risk exposures and create effective strategies to control risks. With regards to fraud prevention, management has to set high moral standards, provide tools to accomplish organizational plans and follow policies, establish and maintain internal controls, and they have to establish and maintain lines of communication and a reporting system to recognize the risks involved within the organization so that safeguarding plans can be updated.

Managers are responsible for making rational decisions that will benefit the organization. Honesty is a policy, and managers may not have a conflict of interest, or make a secret profit at the organization’s expense, and they must keep insider information within the organization private, safeguarding the affairs of the organization. With that said, managers have to supervise employees, making sure that controls are effective in the prevention of fraud.

They, the managers, may not be appointed as a manager, if such a person has been removed from an office of trust because of misconduct, or has been convicted of any economic crimes, been sentenced to imprisonment, has been convicted of an offence involving the promotion, formation, or management of an organization, or has been found guilty of recklessly conducting business or conducting business with the intent to defraud an organization, or, lastly, has been found guilty of breaching his/her duty as an officer of an organization. Fraud can be prevented by appointing the right person as manager, and in effect, those managers can set the standards for other employees to be honest. Managers are responsible for fraud prevention, detection, and the disciplinary hearings of fraudsters. They have the tools to also check up on employees that fall under them. Looking at employee’s phone calls, e-mails, system logs, clock-in and clock-out times, performance, behaviour, and personal issues can prevent and detect fraud.



Managers are responsible for confronting employees for misconduct and the lack of adhering to the Code of Conduct. If problems arise, managers should implement systems to prevent further misconduct. If, for instance, stationary is stolen, a sign-in sheet or safe can be prevention of further theft within the organization. Or if employees are not working all the hours they’re contract requires, a sign-in sheet or access card system can be implemented to prevent payroll fraud. Checking system logs to see what employees are searching for through the system can prevent identity theft, and double checking on client’s account numbers and invoice numbers on files and making sure that delicate information is kept password-safe, can make sure that employees can’t commit cash fraud, cheque fraud, credit card fraud, procurement fraud, accounts receivable fraud, electronic banking fraud, and computer fraud.

Every system should have adequate security measures, cash tills have to have employee codes and passwords, administered by management.