"Financial reporting fraud - defined for this report as 'a material misrepresentation resulting from an intentional failure to report financial information in accordance with GAAP' - is a serious concern for investors and other capital market stakeholders.
"The Association of Certified Fraud Examiners'
2010 Report to the Nations on Occupational Fraud and Abuse found that financial statement fraud, while representing less than 5% of the cases of fraud in its report, was by far the most costly, with a median loss of $1.7 million per incident...
A 2009 KPMG survey of 204 executives of US companies with annual revenues of $250 million or more found that 65% of the respondents considered fraud to be a significant risk to their organizations in the next year, and more than 1/3 of those identified financial reporting fraud as one of the highest risks.
"
How can those in the financial reporting supply chain individually and collaboratively mitigate the risk of financial reporting fraud? While there is no 'silver bullet,' the
Center for Audit Quality discussion participants consistently identified 3 themes:
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A strong, highly ethical tone at the top that permeates the corporate culture (an effective fraud risk management program is a key component of the tone at the top)
* Skepticism, a questioning mindset that strengthens professional objectivity, on the part of all participants in the financial reporting supply chain
* Strong communication among supply chain participants"
See the entire report:
Deterring and Detecting Financial Reporting Fraud: A Platform for Action, October 2010.