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Who Cares about Fraud, Anyway?

Who Cares about Fraud, Anyway?

by Toby Lucich on November 10, 2006

A listserv I subscribe to recently sent this question across my email:

Who cares about fraud anyway if the shrinkage is still reported in the financial statements?

I recently had an external auditor tell me that management has a custodial duty to shareholders to protect both their assets and interests, and that he viewed his work as not only the assurance of financial accuracy, but confirmation of management’s appropriate custodial duties in action.

After 10+ years in industry, working across finance and IT functions alike, I never dreamed of the weak and illogical practices occurring in the next cubicle.

Who Cares about Fraud, Anyway?

{ 2 comments… read them below or add one }

Anonymous December 20, 2006 at 12:25 pm

What if the shinkage is about 100%, like in the case of Enron when all the wealth shinked? SOX is not just about reporting shinkage, – shareholders will find that out shrinkage when the stocks goes to pennies – they won’t need the financial statements prepared by CPAs for that. SOX is about making sure shrinkage is least and there are people who can be made accountable for shrinkage – so that they can be caught and sent to prison, thus lowering the incentove for others to shrink and report shrinked inventories. Why is is so hard to grasp?

Toby Lucich December 21, 2006 at 9:07 am

Agreed.

Shrinkage is nothing more than an unmanaged hand in the cookie jar.

I chalk some degree of disconnect up to the “agency cost” concept, that since the company is owned by a faceless “them” that are shareholders, persons feeling entitled can walk away with what they want. Very strange indeed.

You can’t mandate morale fiber.

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