List of questions to determine if an action is ethical or not:

- Does the action conflict with the ethics policy?
- Does the action conflict with the code of conduct?
- Is the action legal or illegal?
- Could the action cause prejudice or potential prejudice to the company or the employees?
- Does the action require authorisation?
- Who is responsible for the action?
- Does the action require dishonesty?
- What emotions are involved with taking action?
- Does the action require specific training?

Limiting Exposure to Fraud when Employing New Staff

If an organization is to prevent fraud successfully it must have effective policies that minimize the chance of hiring or promoting individuals with low levels of honesty, especially for position of trust.

Pro-active procedures should include the following, before appointing any employee:

• Conduct a background investigation on the individual who apply for employment or for promoting to a position of trust.
• Thoroughly checking a candidate’s education, employment history and personal references.



These above procedures are also known as staff vetting, which means that all applicants are screened thoroughly before employment is offered.
The following should be checked as part of the screening process:

• references,
• criminal records,
• civil records,
• disciplinary records,
• insolvency,
• other businesses,
• qualifications – CV audit,
• technical competence,
• psychometric testing

These preventive measures, however time consuming and costly, would assist them in appointing the correct candidate.

Motivating the Need for Fraud Prevention

Cost savings and increased profits - Annual company losses by means of fraud can be prevented by enforcing the right standards and procedures. If a company suffers losses due to crime, prices of goods and services are increased to make up for the losses, in other words, the consumer has to pay the losses. The other expense regarding crime within a company is detection and investigation costs, and implementing of control costs like computer systems, or clock cards. If fraud is decreased by means of internal controls, profits increase.

Reputational risk - In the case of Enron, it became public that the company was defrauded, and Enron then became a company with one of the worst reputations in the world. Having a good company reputation means that the public trusts the company and is willing to invest in such a company. If a company suffers from a negative reputation, shares will decrease, consumers will stop supporting the company, and other companies can choose to terminate contracts or friendships with such a company.



Positive work environment and staff morale - When fraud is discovered, negative feelings arise in a company. Management needs to make critical decisions about disciplining or firing employees, and relationships between all levels of employees are changed, mutual trust is affected. When there is no fraud losses, the company doesn’t suffer any losses, there is no reputational risk, and staff morale does not suffer.