Virtually all businesses are at risk of fraud, and an allegation of fraud can pose a serious threat to a business. A business facing an allegation of fraud must deal with potential costs that include not only direct losses if fraud is confirmed, but also costs related to an investigation, public relations, fines and penalties, among other costs. Further, there are nonfinancial impacts for a business as well, such as loss of customer confidence and decline in employee morale.
Allegations of fraud can arise from a variety of circumstances. In a recent news article, the Securities and Exchange Commission discussed the formation of a Financial Reporting and Audit Task Force and its belief that it needs to focus on identifying accounting fraud. The article noted that the task force was receiving whistleblower tips and was investigating several cases referred to it by whistleblowers. Fraud allegations also can arise as a result of financial information discrepancies, internal and external audit procedures, customer complaints and anonymous tips.
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