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The Institute of Internal Auditors North AmericaBreadcrumb SeparatorNewsBreadcrumb SeparatorPress ReleasesBreadcrumb SeparatorIIA, CAQ, FEI and NACD Join Forces to Mitigate Risk of Financial Reporting Fraud

IIA, CAQ, FEI and NACD Join Forces to Mitigate Risk of Financial Reporting Fraud

The Institute of Internal Auditors (IIA) has announced it is collaborating with the Center for Audit Quality (CAQ), Financial Executives International, and  the National Association of Corporate Directors in a long-term effort to mitigate the risk of financial reporting fraud.

The partnership was announced in conjunction with the release of the CAQ’s report, Deterring and Detecting Financial Reporting Fraud – A Platform for Action. The CAQ is a Washington, DC-based public policy organization serving investors, public company auditors and the markets. The report is the result of CAQ-sponsored roundtable discussions with corporate executives, members of boards of directors and audit committees, internal auditors, and external auditors – the participants in the “financial reporting supply chain” – as well as investors, regulators, academics, and others. The report offers the perspectives of the roundtable participants and related points to ponder, as well as insights gained from research and guidance on the topic of fraud.

“Although company management and the board of directors are ultimately responsible for managing the risk of fraud, internal auditors can provide additional assurance that effective internal control processes are in place. We are pleased that the report discusses the responsibilities of the internal auditors in the context of others who play a key role in financial reporting by public companies,” said IIA President and CEO Richard F. Chambers, CIA, CGFAP, CCSA

The CAQ’s report identifies three themes to mitigate fraud risk: a strong, highly-ethical tone at the top that permeates the corporate culture; skepticism – a questioning mindset that strengthens professional objectivity on the part of financial reporting supply chain participants; and, strong communication among supply chain participants. The report will serve as a platform for future collaboration, with initial efforts focusing on four areas:

Advance the understanding of conditions that contribute to fraud
Develop techniques to enhance the application of skepticism
Moderate the risks of focusing only on short-term results
Leverage the role of technology in deterring and detecting financial reporting fraud

“These four areas represent the beginning of a coordinated long-term effort that will benefit investors and other users of financial reports. It will be the first cross-functional work in this area,” Fornelli said. “Working together, we have an opportunity to be more effective in reducing the risk of fraud, which – if undetected – can result in a loss of confidence in our financial markets, as well as losses in shareholder value and, in some cases, the bankruptcy of the company itself.”

To view a video featuring The IIA’s Richard Chambers and CAQ Executive Director Cindy Fornelli discussing the collaborative anti-fraud effort, visit http://www.youtube.com/watch?v=hEiZIigQyeI.