tonefromthetopThe primary defense against fraud is a robust series of internal controls. Internal controls can be defined as a series of activities whereby employees in the normal course of their duties identify errors or irregularities that may occur. As a practical matter internal control procedures add a level of bureaucracy to the activities of an organization. Control procedures can be subject to employee resistance for a number of reasons. Internal controls need constant maintenance allowing for the procedures to adapt to changes in the business environment. Controls need monitoring to assure the specified procedures are being adhered to, and not bypassed in the name of expediency.

The starting point for any internal control system is the “Tone from the Top”. The Tone is a communication to employees stating unethical behavior will not be tolerated. The communication needs to be explicit and repeated regularly. Operating on the presumption that employees share management’s dedication to ethics, is a policy which may invite disappointment. Further, employees can use the lack of communication as rationalization for unethical behavior.

If we expect certain behaviors from our employees it is important to communicate our expectations to them. We need to tell them that unethical behaviors, including fraud will not be tolerated. We need to communicate that committing a fraud or participation in any other unethical behavior is grounds for dismissal.

The actual communication should be specific and fully encompassing. Best practices would be an inclusion in the Organization’s employee manual. Have the employee sign acknowledgement of the policy annually. The Organization may consider consulting an attorney that specializes in employment matters for advice in the development of content and delivery method.

Please be sure to get professional advice specific to your situation before acting on anything in this article. If you have any questions, please contact us at (908) 782-7900 or email