Fraud Investigations & the SEC: What to Do and What to Know

Episode Summary

No company or board wants to be the target of an SEC fraud investigation. That consternation, however, can be greatly magnified if a board does not have the right protocols in place for dealing with fraud. What is the board’s role before, during, and after a fraud incident?

In this episode, Cindy Fornelli, Executive Director for the Center for Audit Quality, joins host TK Kerstetter to discuss the board’s role in fraud investigations.

We all know that you cannot prevent fraud. If somebody is keen on perpetrating a fraud, it’s really hard to prevent that. So what’s important is early detection… Having those protocols in place—knowing what you’re going to do, who you’re going to contact, who needs to be in the room, who needs to make those decisions—will make dealing with a potential fraud, once it’s uncovered, much easier.
— Cindy Fornelli, Executive Director, Center for Audit Quality

Fornelli outlines best practices for early detection and guidelines for self-reporting to the SEC. She directs viewers to several additional resources (listed below), which collectively guide boards and management through all phases of a fraud investigation – before, during, and after. In this episode, we cover:

  • What steps can boards and management take to detect fraud issues early?
  • Once the board is notified of fraud, what role do directors play?
  • What are the guidelines for self-reporting fraud to the SEC?
  • What’s the SEC’s thought process when they’re giving credit for self-reporting?

Anti-Fraud Resources:

The CAQ's Anti-Fraud Collaboration ReportREPORT » Anti-Fraud Collaboration: Addressing Challenges for Highly Subjective and Complex Accounting Areas

The Anti-Fraud Collaboration is a coalition of leading organizations representing key constituents of the financial reporting supply chain. This CAQ report captures the insights gleaned during two 2016 workshops, which brought together audit committee members, financial executives, internal auditors, external auditors, and regulators.

Anti-Fraud Collaboration WebcastWEBCAST » SEC Investigations: Are There Benefits to Cooperation and Self-Reporting?

In this webcast, a panel of experts discuss the steps that companies and their boards should take following detection of a fraud incident. Are there tangible benefits to self-reporting to the SEC? At what point should the SEC be informed of potential misconduct? What are the risks if a company does not self-report?

Three Keys to Effective Internal Control over Financial Reporting

Audit Committee ICFR

In this guest post, the CAQ’s Cindy Fornelli provides insights for audit committee members, management, and other audit professionals on enhancing internal control over financial reporting. (4-minute read)

Read Here