Corporate fraud

Corporate Fraud Discovery: Will You Please be Quiet, Please?

Dr. Michael-A. Leuthner
Dr. Michael-A. Leuthner

What’s about the communication with the public if you identified fraudulent activities within your company?

Following the first article of this series, which described the human factor in fraud, the second article described the different kinds of fraud that can be found in a business context. In the third article it was explained how to deal with a freshly discovered fraud in an organization and what specific steps should be taken next. The fourth article showed which simple but highly effective measures can be taken to deter occupational fraud. The fifth article described the reasons for the reduced motivation of a company to inform customers, creditors and shareholders when fraud was discovered within the company. But a concealment of fraud against the stakeholders could have negative consequences.

Corporate fraud: The veil of silence

Dr. Michael-A. Leuthner
Dr. Michael-A. Leuthner

By Dr. Michael-A. Leuthner, CPA

Most people don’t like negative news, therefore people tend to simply sweep the problems under the carpet, and after all they do not wear their hearts on their sleeves. Nobody is interested to peddle on the subject. But see what’s coming next.

Interestingly, after the second article was posted in Germany at www.xing.com, in the first 24 hours it received over 4,500 hits. One reason therefore was also the upcoming of ‘Dieselgate’ with Volkswagen AG. So, there could be the impression that reporting about fraud seems again ‘en vogue’.

This could lead us to the conclusion that neither the company that discovered a fraud is motivated to publish bad news, nor suppliers, customers shall be informed about that incident. Furthermore, creditors shouldn’t be informed after all. Why is that so?