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TORONTO, July 30, 2009 – A new publication by the Canadian Institute of Chartered Accountants (CICA) is designed to help boards of directors protect their companies from the increased risk of fraud in today’s unsettled economic environment. The Director Alert, titled “Fraud Risk in Difficult Economic Times”, provides guidance to directors on how to satisfy themselves that management has implemented reasonable and prudent measures to manage the risk of both internal and external fraud. External fraud includes losses from frauds by suppliers, customers and others outside the company. Internal frauds are committed by those within an organization, whether management or employees, and may include asset misappropriation, corruption or financial statement fraud. “There are elements of opportunity, pressure and rationalization present in fraudulent actions,” said publication author Mike Savage, practice leader for Fraud Investigation and Dispute Services for Ernst & Young in Canada. “Challenging economic conditions aggravate each of these risk factors, elevating the risk of fraud.” The Alert presents a series of questions to serve as a catalyst for useful dialogue both among directors and with management. “The harm that fraud inflicts on an organization extends beyond direct financial loss,” stressed Catherine Smith, a corporate director and member of the CICA’s Risk Management and Governance Board. “The real harm is the element of misrepresentation inherent in the fraud. Trust relationships erode, reputations are impaired and concerns emerge about what else remains undetected.” The CICA publication notes that while it is not practical to guard against all possible frauds, there are some key elements that should be addressed in an anti-fraud program. “Some elements may need to be reassessed in light of the current economic situation,” said Savage. “For example, directors need to review whether management has given appropriate consideration to the effects of cost-cutting on the company’s fraud risks.” One of the most important elements of fraud prevention is the tone set by directors and management since it establishes the environment in which people make choices. “Employees take their ethical cues from the words and actions of their leaders,” said Smith. The Director Alert is being issued by the CICA’s Risk Management and Governance Board and can be downloaded (www.rmgb.ca). It can also be found on a special CICA site dedicated to the global financial crisis (www.cica.ca/financialcrisis). The Canadian Institute of Chartered Accountants (CICA), together with the provincial, territorial and Bermuda Institutes/Ordre of Chartered Accountants, represents a membership of approximately 75,000 CAs and 12,000 students in Canada and Bermuda. The CICA conducts research into current business issues and supports the setting of accounting, auditing and assurance standards for business, not-for-profit organizations and government. It issues guidance on control and governance, publishes professional literature, develops continuing education programs and represents the CA profession nationally and internationally. CICA is a founding member of the International Federation of Accountants (IFAC) and the Global Accounting Alliance (GAA). – 30 – For more information or to arrange an interview, contact:
Tobin Lambie, Manager, Media
CICA
(416) 204-3228
tobin.lambie@cica.ca
www.cica.ca
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