What’s Our Tolerance for Fraud?

With the availability of automated and cloud-based process control solutions like ART, fraudsters are having a tougher time perpetrating their schemes. However, the risk of fraud is always present. Each week, we hear of corporate scandals where executives mislead, deceive, or misrepresent company activities. And yet fraudulent acts continue to be commonplace in today’s society. As penance for these crimes, companies (and sometimes individuals) will pay a fine, have their licenses suspended, and are back at work in no time.

So this begs the question – What’s our tolerance for fraud?

In a recent case, both EY and its client, Weatherford International, have been fined a cumulative $152 million for failing to detect and, in Weatherford’s case, committing the fraud.

The SEC report said that EY probably would have uncovered the scheme at Weatherford International in 2007 had it followed auditing standards. Unfortunately, EY “repeatedly failed to detect the company’s fraud until it was more than four years ongoing,” according to the SEC report.

Was it blatant disregard, lack of auditing skills? After all, Weatherford hired EY to audit their books to ensure the integrity of their financial reporting.

In response to the scandal, EY said, “Our commitment to audit quality is ongoing, and we are continually reviewing and enhancing our audit procedures, policies and training of our people.”

In a perfect world, our tolerance for fraud would be zero – and these organizations would have used automation to keep a watchful eye on corporate controls, standardize closing activities, and automate the reconciliation process.

Click here to schedule a demo of ART, and learn how you can transform your monthly close process.