Managing Fraud Risk, Culture, and Skepticism During Covid-19

 The Center for Audit Quality (CAQ) has recently published an article on Managing Fraud Risk, Culture, and Skepticism During Covid-19. As stated in the publication: “The COVID-19 pandemic has resulted in unprecedented social and economic paralysis.”  Unfortunately, this crisis is highly likely to result in increased occupational fraud and abuse as discussed in the article and highlighted below:

“Companies should be giving some thought to what otherwise might not have been top of their mind—that their organization is susceptible to fraud, even by employees with good intentions. We find ourselves facing an economic downturn that will impact nearly every industry sector, some more deeply than others. With a significant decrease in expected revenue, businesses will need to turn to cost-cutting measures. For most companies, likely that will involve a reduction in payroll. What will that mean for the employees still on the job?

Potential sources of pressure, opportunity, and rationalization—the three sides of the fraud triangle—will be present in this economic downturn. While pressure can be a positive force—it can inspire creativity and efficiency—in some situations it can instill fear. Employees will be concerned about the viability of the company and whether it can navigate this unprecedented downturn. One or more employees, from management to staff, might come to believe that falsifying operational or financial information, in the short term, will make the company appear more liquid than it actually is.

Employees might also face personal financial pressures. Research has shown that one-quarter of people who commit fraud have experienced financial difficulties. Over 22 million people have filed for unemployment over a four-week period due to the COVID-19 crisis. If a family was dependent on two incomes to meet monthly expenses and one spouse is no longer working, the household member who is still employed might feel pressure to find ways to compensate for the loss. Even otherwise honest employees, under stressful circumstances, might commit fraud. When assessing the risks of managing through a crisis, corporate leaders should consider the pressure that employees are under.”

 Click here for a copy of the Article.