Essay on External Auditor Versus Internal Whistleblower

Essay on External Auditor Versus Internal Whistleblower

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External Auditor versus Internal Whistleblower: Who is More Effective in Deterring Fraud?
Fraud and financial improprieties occur in all businesses: private, public, governmental agencies, and not-for-profit organizations. Fraud leads to a loss of company properties through illegal means that cost companies nearly a billion dollars annually (KPMG Peat Marwick LLP).
(#9) The Center for Audit Quality published a report identifying the key players responsible for the mitigation of fraud risk to the investing public and other stakeholders as the board of directors and audit committee, the internal and external auditors, and the company’s management. (Elizabeth Radar 6). (#6) While many players share in the role to mitigate fraud risk, the position held by an external auditor and the one fulfilled by a whistleblower both play a critical role in protecting a company’s assets from the clutches of unethical employees. A 2009 KPMG survey of 204 executives of U.S. companies with annual revenues of $250 million or more found that 65% of the respondents considered fraud to be a significant risk to their organizations (Elizabeth Radar).
To understand what constitutes fraud, and thereby identify what can be labeled as fraudulent actions, its meaning must be defined. Generally speaking, fraud is any involvement in an intentional deception. Accounting fraud, at its core, is a breach of trust by an employee that results in an unauthorized misappropriation of assets or a misrepresentation of financial statements where the criminal actions benefit the employee either directly or indirectly (Siegfried).
The employees mentioned above who lie, steal, or use their jobs for their personal gain are committing fraud. There are numerous forms of fra...


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... to uncover each case of fraud, we would be disappointed for fraud detection through an audit is small compared to the number of fraud cases reported through management’s development of whistleblower hotlines. But before puckering up, consider the consequences to your personal life and career. Whistleblowing is a slippery slope that demands careful consideration before embarking on a path of potential self-destruction. However, if you find the proverbial whistle perched on your lips, blow it! To quote J.R. Bennett who has completed research on the matter, “Blind loyalty, ambition, intimidation, and corruption no longer reign supreme over honesty. And we have reason to hope for an improving ethical climate in which government agencies and private corporations will be more honest. Not Superman but ordinary whistleblowing men and women give us hope.” (Bennett)(#3)

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