I disagree that governance has no relation to fraud. Governance enhances transparency, security and accountability in a company which eventually mitigate the occurence of fraud (Roman, 2014).
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Cartoon depicting the VW Scandal (Photo Courtesy of Autogyaan.com)
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Recently, I chanced upon an article which discussed about the Volkswagen’s carbon-emission scandal in 2015. It revealed the main reason why fraud happened was due to the organisation's culture. The management had unrealistic result-based goals and abhorred failure, employees who weren't able to meet the goals or solve the organisation's problems were fired. This inevitably instilled fear in the employees and they were pressured to commit fraud in order to keep their jobs (Hotten, 2016). Additionally, it was an organisation's norm to fraud as long as employees were producing results.
I feel that such culture would give rise to an opportunity for individuals to fraud. Furthermore, poor governance increases the risk of breaching data security, regulatory compliance requirement and costs due to employee's inefficiencies (McCue, 2007). Thus, I disagree that individual’s dishonesty/greed is the sole reason why fraud occurs, if organisations were able to set a proper tone at the top and cultivate an ethical culture with strong internal controls, such incidences could be deterred. The audit committee also have a major role to play in overseeing the internal controls, monitor the performance of both internal and external auditors and report any discrepancies to the board immediately.
(218 words, excluding in-text citations)
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References
Hotten, R. (8 January, 2016). The Biggest Lesson
from Volkswagen: Culture Dictates Behavior. Retrieved from Entrepreneur:
https://www.entrepreneur.com/article/254178
McCue, A. (29 March, 2007). Poor IT governance key
to project failures. Retrieved from ZDNet:
http://www.zdnet.com/article/poor-it-governance-key-to-project-failures/
Roman, A. (30 January, 2014). The Three Pillars of
Corporate Governance. Retrieved from Convene:
https://www.azeusconvene.com/the-three-pillars-of-corporate-governance/
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