Financial Fraud - Importance of an Internal Control System
Saarni, Jenna (2012)
Saarni, Jenna
HAAGA-HELIA ammattikorkeakoulu
2012
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2012112316116
https://urn.fi/URN:NBN:fi:amk-2012112316116
Tiivistelmä
This thesis tackles the problem of financial fraud, and the goal of the research has been to investigate the importance and the efficiency of internal control systems. The precise research problem is; how to prevent accountants and managers from conducting financial fraud – importance of having an internal control system? The thesis has been commissioned by HAAGA-HELIA University of Applied Sciences, which expects to receive valuable research concerning ethics in financial accounting.
To approach the problem, first some theory behind fraud, risk management and internal control will be looked at. The two of the most famous financial fraud cases, Enron and the Lehman Brothers, will be shortly presented. These, and an overview of a research on fraudulent financial reporting in U.S. public companies, will give the reader an insight of the seriousness of the topic.
The research has been focused on consultants, as experts of the topic, representing the Big Four auditing companies. In addition to these, a recent fraud case in Company X has been examined. The data collection has been conducted with the use of a Webropol survey and interviews. The research process has taken place during late spring and early autumn 2012.
The collected data has been analysed with comparison to the theory framework. The COSO ERM and the COSO cube -model are the main measurement tools used in the analysis. The research and findings were completed in October 2012. As the main findings, the paper presents that an internal control system should be a part of every organisation’s risk management, however the depth of the system should be in proportion with the size of the company and the corporate culture. Based on the COSO cube –model and the presented findings, the essential consideration for companies should be in creating functioning components of the internal environment, information and communication flow, as well as event identification.
To approach the problem, first some theory behind fraud, risk management and internal control will be looked at. The two of the most famous financial fraud cases, Enron and the Lehman Brothers, will be shortly presented. These, and an overview of a research on fraudulent financial reporting in U.S. public companies, will give the reader an insight of the seriousness of the topic.
The research has been focused on consultants, as experts of the topic, representing the Big Four auditing companies. In addition to these, a recent fraud case in Company X has been examined. The data collection has been conducted with the use of a Webropol survey and interviews. The research process has taken place during late spring and early autumn 2012.
The collected data has been analysed with comparison to the theory framework. The COSO ERM and the COSO cube -model are the main measurement tools used in the analysis. The research and findings were completed in October 2012. As the main findings, the paper presents that an internal control system should be a part of every organisation’s risk management, however the depth of the system should be in proportion with the size of the company and the corporate culture. Based on the COSO cube –model and the presented findings, the essential consideration for companies should be in creating functioning components of the internal environment, information and communication flow, as well as event identification.