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®2015 Association of Certified Fraud Examiners, Inc.

Building an Effective

Ethics Program

Monitoring the Ethics Program

®2015 Association of Certified Fraud Examiners, Inc. 2 of 24

Introduction

Post-implementation challenges

Conducting an ethics audit

Why do ethics programs fail?


Video Discussion

Read the synopsis of Diann Cattani’s scenario

in your workbook and watch the following video.


Video Discussion


Video Discussion

1. How would you establish an anti-fraud culture

at Diann’s employer? How would you sustain

it?

2. What obstacles do you see in establishing and

sustaining an anti-fraud culture at the

consulting company?

3. If you were Diann’s employer, how could you

address her ethical dilemma?


Post-Implementation Challenges

Even if you build a strong new ethics program, you

can expect to encounter challenges along the way.

Some of these challenges might include:

Teaching employees how to identify an ethical

dilemma

Changing the culture of the organization

Addressing ethics across the globe

Assessing the program’s effectiveness


Identifying an Ethical Dilemma

Making an ethical decision involves identifying red

flags of unethical behavior:

An ethics policy must be general enough to

apply to a multitude of situations and job

functions

You do not want the policy to be so broad that it

is difficult to apply

The policy cannot guide employees to a specific

response for every possible dilemma; provide

examples to make it actionable and effective.



It is helpful for employees to be aware of warning

signs before entering an ethical hazard zone:

Discussing these during training can empower

employees to make the right choice when an

ethical dilemma arises.

Michael Josephson came up with ten common

rationalizations for unethical acts that can be

used during training to help employees navigate

ethical dilemmas.


Common Rationalizations

Beware when someone says, “It is ethical if …”

1. It is legal and permissible

2. It is necessary

3. It is just part of the job

4. It is all for a good cause

5. I am just doing it for you


Common Rationalizations

6. I am just fighting fire with fire

7. It does not hurt anyone

8. Everyone else is doing it

9. I do not gain personally

10.I have got it coming


Changing the Culture

An ethics program is greatly influenced by the

organization’s culture

Both formal and informal organizational

systems reinforce certain types of behavior



Example:

A company has an ethics code that forbids

employees from receiving gifts from clients. The

president is known to have accepted box tickets

to a football game from a client. This “we say

one thing, but do another” approach leads to

widespread cynicism and undermines the ethics

program.



If an organization wants to transform itself into a

more ethical culture, all relevant formal and

informal organizational systems need to be in

alignment.

Culture change attempted at lower levels is not

likely to be effective unless it is fully supported

and modeled by senior management.



Changing organizational culture is more difficult

than developing it:

In a new organization, workers are open to

learning and accepting the culture of their new

workplace.

Humans have a tendency to want to conserve

existing culture.

It should be based on the assumption that

human beings are essentially good and capable

of development and change.


Ethics Across the Globe

Globalization is becoming a factor in more and

more businesses every day.

When an organization has stakeholders such as

governments, business partners, shareholders,

and employees throughout the world,

implementing an ethics program presents even

greater challenges.



If an organization conducts a significant amount

of business with another country, it is important

to educate employees about that country’s

culture

Expatriates and employees traveling for routine

business need clear guidance that extends to

the ethical issues that are likely to arise in their

new role because these might contribute to

ambiguity and confusion about appropriate

behavior



Certain ethical standards are universally accepted

in all societies. But beyond basic tenets such as

“thou shall not kill” and “do unto others as you

would have them do unto you,” ethics gets more

complicated from country to country:

Honesty

Nepotism

Bribery



The best way to deal with cross-cultural ethical

conflicts is to:

Educate employees about the countries the

organization does business with

Establish clear guidelines in the ethics program

for making decisions when such conflicts arise

Ensure international vendors and customers

understand the organization’s ethical standards


Assess the Effectiveness

Many companies make the mistake of creating an

ethics program that looks great on paper but does

not make a difference in the culture or ethical

standards of the company. It is important to:

Continually assess the effectiveness of the

program

Perform ethics audits or incorporate specific

procedures to audit the ethics program during

routine audit work


Ethics Audits

Review the company’s ethical code, ethics

training programs, and compliance policies for

legal and industry guidelines regarding ethics

Make sure that the policy covers the full range

of common issues in business

See how past ethical breaches were handled

Find out what the company has done to prevent

future occurrences

Conduct private interviews with employees

about ethical tone


Why Do Ethics Programs Fail?

Not enforced

Effectiveness not monitored

Treated as a fad or check-the-box exercise

Low priority until crisis hits

Leaders don’t walk the talk

Lack of awareness and visibility

Lack of effective training

Fear of retaliation

Weak controls


Avoiding the Mistakes

Don’t leave it collecting dust on the shelf—bring

it life continually in new and engaging ways

Make sure it aligns with your culture and

resonates with your employees

Do proper due diligence for all employees

Be mindful of how reward systems can lead to

unethical behaviors

Ensure that ownership and accountability is in

the C-Suite

Create a credible hotline that employees value

®2015 Association of Certified Fraud Examiners, Inc.

Building an Effective

Ethics Program

Monitoring the Ethics Program

building an effective ethics program - fraud · pdf filebuilding an effective ethics program...

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