I was recently interviewed for an article in Financial Executive Magazine. The article contained comments from a variety of executives, educators and consultants. We were asked to speculate on the future of financial reporting and the finance function in corporations.
Naturally, my comments pertained to fraud and how that may impact the finance function.
Tracy L. Coenen, a principal in Sequence Inc. in Milwaukee, has spent the 10 past years in forensic accounting. A CPA and certified fraud examiner, she has a somewhat jaundiced view of companies’ current and prospective anti-fraud efforts. “Until companies admit that fraud may have an impact on them, that won’t change,” she says. “A common estimate is that fraud represents 5 percent of revenues each year . and a lot of companies don’t think that’s material to them.”
Coenen agrees that “some of the better companies” have used Sarbanes-Oxley compliance to fix some of their internal controls. But, in an ominous thought for the future, she adds, “Some simply did the documentation they were required to do; they didn’t use to effort to improve the [financial reporting] process.”
But Coenen doesn’t think the answer is future regulation, and doesn’t favor “a lot of legislation; I’d rather see companies be proactive about it.” She believes that companies “could do a lot more to act on risk; they are not taking preventive measures. They don’t make it a top priority. Companies think their controls are better than they really are.”