Insights: Article

Top 5 Reasons Why Your Business Needs a Fraud Hotline

April 27, 2017

In 2005, the American Institute of Certified Public Accountants (AICPA) recommended that all organizations implement a whistleblower system for reporting wrongdoing, specifically fraud. Why? Simply put, all businesses—large and small—are at risk from both intentional ethical and legal violations, as well as unintentional mistakes that for whatever reason may not be so easy to report.

Take fraud as the most obvious example of why a business might benefit from an anonymous reporting hotline. In 2014, the Association of Certified Fraud Examiners (ACFE) presented a report on nearly 1,500 fraud cases from around the world to the Nations on Occupational Fraud and Abuse. The report found that the median loss resulting from a case of fraud was $145,000, while over a fifth of fraud cases resulted in losses of at least $1 million. In many cases, small businesses are at greater risk of fraud because they lack the oversight and controls found at large, publically-traded corporations.

What’s to Report?
Financial fraud isn’t the only concern for businesses. Ethical violations of every sort imaginable can take place at any organization and within any department. With an anonymous fraud hotline in place for employees, tips can be submitted safely and securely for all manner of wrongdoing. Protecting those who come forward is one of the most effective ways at rooting out fraud and protecting the integrity and longevity of your business.

Need more? Below are the top five most common reports submitted to anonymous hotlines. If you relate to any of them, your business should strongly consider setting up a hotline of its own.

1. Financial Fraud
Every business is at risk of financial abuses and errors. From inadequate accounting procedures to audit issues and simple billing errors, there are a plethora of opportunities for mistakes to be made or criminal activity to take place. The problem is, fraud often takes place at high levels, and lower-level employees fear for their job security should they come forward to make a formal complaint. An anonymous reporting system protects those who’ve discovered the fraud and only seek to protect the company by coming forward.

2. Ethics Violations
Some business practices may not necessarily break any laws, but they would still be considered unethical if utilized improperly. Ethical breaches can include anything from code of conduct violations to outright theft, including intellectual property theft. In some cases, ethics linger in a sort of grey area between right and wrong, which can make it hard to submit a report. With a hotline system, employees can speak up and let HR or others determine if a violation has truly occurred.

3. Privacy Concerns
In today’s digital world where everyone and everything is connected and online, privacy concerns have never been more worrying. Identity theft can happen to anyone, and breaches can occur anywhere personal information is stored. The health care industry is particularly at risk for inadvertent confidentiality breaches.

4. Safety and Security
Security goes hand-in-hand with privacy. Securing both physical and digital property is becoming harder and harder with the advancement of technology. Hackers target everything from electronic door locks to customer databases. Further, businesses that don’t take workplace safety seriously put their workers in jeopardy, as well as their customers. OSHA violations aside, an unsafe work environment is neither efficient nor profitable. In this instance, an anonymous tip could very well save lives.

5. Corporate HR Violations
No department benefits more directly from the implementation of a reporting hotline than human resources. HR professionals constantly deal with ethical and workplace safety issues, from employee handbook violations to harassment and discrimination. Like fraud, harassment is often a difficult thing to report because it’s a difficult subject to discuss. Allowing employees to file an anonymous compliant offers the safety and security needed to protect your workers from further abuse.

Eide Bailly’s Third-Party Hotline Service
As a public accounting firm, Eide Bailly may not be the obvious partner for setting up an anonymous reporting system. But when you consider that an accounting firm’s role is to ensure accurate financial reporting, conduct audits and manage risk on behalf of their clients, choosing Eide Bailly to help you with your own risk management makes complete sense.

The firm provides anonymous, third-party hotline services to clients of all sizes and in all industries. Eide Bailly operates the hotline, be it via phone or an anonymous online submission form, and acts as an independent resource that your employees can rely on to discuss confidential concerns. The process protects the individual reporter, as well as the information, ensuring it reaches the necessary level within your organization so the matter can be resolved promptly, safely and securely.

Don’t let a situation get out of control simply because someone in your organization doesn’t feel comfortable reporting what they’ve seen. Set up an anonymous hotline reporting system that empower your employees to speak up when they see something unsafe, illegal or unethical—it could save your business.

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