Introduction
The misappropriation of assets involves the misuse or theft of the organization’s cash or non-cash assets by the fraudulent organizational leaders or employees. On the other hand, financial statement fraud involves deliberately misstating or omitting information in the financial reports of the organization. These economic crimes have numerous undesirable impacts on the businesses. For instance, the companies, which fall victim to asset misappropriation suffer huge losses. Financial statement fraud and asset misappropriation also undermine the integrity, credibility, transparency, and quality of the process of financial reporting (Vlad, Tulvinschi, and Chiriţă 268). As an outside consultant to Hollate Manufacturing, I would advise the CEO, Jack Brennahan, and the CAE, Jonas Durand, to implement different policies to mitigate the potential for assets misappropriation and financial statement fraud within the company.
I would first advise Brennahan and Durand to implement a whistleblowing policy in the company to mitigate the potential for the embezzlement of assets as well as financial statement fraud. It would be vital for them to design this policy in such a way that it would ensure that the whistleblowers would raise their concerns about the financial statement fraud and embezzlement of assets in the company without fear of dismissal, discrimination, or victimization. The policy ought to provide avenues for the whistleblowers to report any financial statement fraud or assets misappropriation and get the response on the actions that would be taken. It should also encourage them to feel confident in reporting these issues and reassure them that they would be protected from possible victimization. Consequently, this policy would make the executives and employees of Hollate Manufacturing report any issue of suspected fraud without fear.
I would also advise Brennahan and Durand to implement a zero tolerance policy against the financial statement fraud and misappropriation of the company’s assets. It should clearly set out the actions that the company would take against those who would engage in the embezzlement of assets or financial statement fraud. Besides, the policy ought to make punishment extremely harsh for those who would commit financial statement fraud or embezzle the company’s assets. The harsh punishment defined in the policy would make sure that no one would engage in the fraudulent activities. Consequently, the policy would help mitigate any fraud by the Hollate’s employees and managers through scaring them.
Moreover, I would advise Hollate’s CEO and CAE to implement internal controls to help mitigate the potential for financial statement fraud as well as embezzlement of the company’s assets. The management should set and implement high standards for adherence to the internal controls (Center for Audit Quality 17). It would be crucial for leaders of Hollate Manufacturing to implement plans to ensure the truthfulness of its financial statements, protect its assets, and discover any fraud. They would need to monitor and revise Hollate’s internal control programs regularly to ensure that they would be efficient in alleviating the risk of financial statement fraud and asset embezzlement schemes. The implementation of effective internal controls within Hollate Manufacturing would ensure that the financial and asset management are carried out in line with the highest standards and, as a result, prevent any misappropriation or fraud.
Lastly, I would advise the two leaders to implement a strong ethical culture starting at the top. According to the Center for Audit Quality (10), a robust ethical culture begins with the most senior organization leaders. Thus, all the most senior executives of Hollate Manufacturing should lead by example by behaving appropriately and ethically. It would be vital for them to promote a culture of fraud awareness among all the employees. They should also require the employees to do the right things all the times. Ideally, the ethical culture implemented by the company leaders must support well-designed controls, which would lessen the possibilities for financial statement fraud and assets embezzlement within Hollate Manufacturing.
Works Cited
Center for Audit Quality (CAQ). "Deterring and detecting financial reporting fraud: A platform for action." (2010).
Vlad, Mariana, Mihaela Tulvinschi, and Irina Chiriţă. "The consequences of fraudulent financial reporting." The USV Annals of Economics and Public Administration 11.1 (2011): 264-268.
