It is a question that always arises in the wake of any high-profile fraud: How could this have happened?
Too often, responsibility for fraud is passed along like a hot potato among members of the management team, outside consultants and the board. Ultimately, senior management has the responsibility to detect and prevent fraud. Unfortunately, according to a study of all of the Securities and Exchange Commission accounting and auditing enforcement actions brought between 1998 and 2007, in alleged accounting frauds the CEO and/or CFO was directly involved 89 percent of the time.
What’s even more clear? The financial impact of fraud is significant. According to a paperpublished by New York University Law School, the annual cost of corporate fraud to investors is in the range of $180 to $360 billion.