While one may expect that companies and their employees will always seek to do the right thing they should consider the fact that corporate fraud is something that has always and will always exist. However, the level and complexity of fraud has grown and reached a critical level prior to the passage of the Sarbanes Oxley Act in 2002 as a result of many financial accounting scandals that had taken place. At that time the public had become aware that companies were acting in their own interest at the behalf of their investors. Companies started to crumble when accounting scandals were uncovered investors. The result was a public that was afraid to invest and didn’t want to take a chance that their money put in would be gone leaving them with nothing. It was time to do something and that together with the introduction of the Sarbanes-Oxley Act, which was designed to help protect the public from fraud.
Prior to the Sarbanes Oxley there were audits in place but in many cases there were conflicts of interest and in cases where the company appeared profitable then the CEO and Board of Directors decided they could blindly ignore the underlying financial problems that existed. After the passage of SOX there were additional measures put in place to ensure that such problems didn’t occur again in the future and that the appropriate amount of regulation was in place to ensure that fraudulent actions were greatly reduced and criminally penalized. Companies must make every effort to ensure their actions are both legal and ethical and that employees understand the implications of their actions relative to the ethics of the company.
Fraud prevention is now at the top of the list for many corporations as fraudulent actions can occur anywhere within the organization and is not limited simply to those in accounting or those who prepare financial statements. To that end fraud prevention has become a very big business. According to Jerry Oldham from World Watch...