Corporate fraud is a serious issue that affects us all. Its consequences can weaken the public’s confidence in markets and have long lasting damaging effects on society. The COVID-19 crisis has also increased the pressure on companies. This has created new opportunities to commit fraud making companies more vulnerable to corporate failure.
This publication, with its counterpart on going concern, presents recommendations to strengthen the financial reporting ecosystem. It takes another look into all key players’ role (including auditors, companies’ boards and management, legislators, standard setters and regulators) who must take a coordinated approach to achieve tangible results in tackling fraud. With this aim we propose the following recommendations:
- require companies to have and publicly report on a fraud risk management system
- pay specific attention to senior management fraud
- mandate an audit committee in all public interest entities
- make early warning mechanisms for auditors effective
- clarify auditing standards for a common understanding of the auditor’s role
- improve auditors’ access to knowledge and awareness about fraud
- auditors to clearly communicate their work and conclusions about fraud
We also invite relevant parties to explore how to use technology and forensic experts in the most effective way within financial statements audits.
We call for a joint effort of key parties to strengthen the ecosystem. To this end, we ask you to send your thoughts and opinions on our recommendations to [email protected]. The original deadline for submissions – 30 April 2021 – has been extended to 30 May 2021.