Background checks verify a candidates education

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Background checks verify a candidate's education, employment history, and personal references, including references about character and integrity. After an employee is hired, continuous evaluation of employee compliance with the company's values and code ofconduct also reduces the likelihood offraud. Training All new employees should be trained about the company's expectations of employees' ethical conduct. Employees should be told of their duty to communicate actual or suspected fraud and the appropriate way to do so. In addition, fraud aware- ness training should be tailored to employees' specific job responsibilities with, for example, different training for purchasing agents and sales agents. Confirmation Most companies require employees to periodically confirm their responsibilities for complying with the code of conduct. Employees are asked to state that they understand the companyt expectations and have complied with the code, and that they are unaware of any violations. These confirmations help reinforce the code of conduct policies and also help deter employees from committing fraud or other ethics violations. By following-up on disclosures and non-replies, internal auditors or others may uncover significant issues. Discipline Employees must know that they will be held accountable for failing to follow the company's code of conduct. Enforcement of violations of the code, regardless of the level of the employee committing the act, sends clear messages to all employees that compliance with the code of conduct and other ethical standards is important and expected. Thorough investigation ofall violations and appropriate and consistent responses can be effective deterrents to fraud. Fraud cannot occur without a perceived opportunity to commit and conceal the act. Management is responsible for identifying and measuring fraud risks, taking steps to mitigate identified risks, and monitoring internal controls that prevent and detect fraud. Identifying and Measuring Fraud Risks Effective fraud oversight begins with management's recognition that fraud is possible and that almost any employee is capable of committing a dishonest act under the right circumstances. This recognition increases the likelihood that effective fraud prevention, deterrence, and detection programs and controls are implemented. Figure 11-5 summarizes factors that management should consider that may contribute to fraud in an organization. Mitigating Fraud Risks Management is responsible for designing and implementing programs and controls to mitigate fraud risks, and it can change business activities and processes prone to fraud to reduce incentives and opportunities for fraud. For example, management can outsource certain operations, such as transferring cash collections from company personnel to a bank lockbox system.
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