Circle of Trust
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In the '80s, McDonalds conducted a study to determine what motivated its employees to steal. Their studies revealed that:
- One-third of employees stole only if they had the opportunity (unlocked cash drawer, alarm not set at night, etc)
- One-third of employees stole no matter what the circumstances
- One-third of employees never stole no matter what the situation
Our number one objective as auditors is to reduce a company's exposure to fraud. One of the most effective strategies for auditors is to immerse yourself in the operation to learn about employee behaviors, along with likes, and dislikes. For example, if you know an employee is suffering from congestive heart failure and he requires expensive medication that the insurance company does not pay for, you may cross-reference payroll records to see if he is able to pay for the med's through salary alone.
1. How can we get into employees' "circle of trust?"
2. In order for us to conclude that someone is concealing evidence, we must first identify how they go about their business. What signs should we look for? Over time, if we are not careful, working relationships can form into strong bonds which can cloud our objectivity. We can ill-afford to have our integrity questioned at any stage of the audit.
3. Do you have an example of how auditors have applied 'spirit of the law' and / or 'letter of the law' in their travels?
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Solution Summary
This solution explains the circle of trust in auditing. It is explained how we get employees into the circle of trust, and how auditors have applied the spirit of the law or letter of the law in their travels. Detailed discussions are provided.
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1. How can we get into employees' "circle of trust?"
-- You get into the circle of trust by doing things that let the employees know they can confide in you, without retaliation. As great as it all seems, if an employee knows that their biggest risk is losing their source of income, they're not going to confide, no matter how much they trust you. The auditor needs to let employees know that their identity will be protected to the utmost extent possible, which will immediately begin building the circle of trust. Today's times are tough for many people and the salaries at various jobs are lower than they have been in the past. For an employee to begin talking about wrongdoing, they need to know they'll still have a job, and more so, they need to know they'll still have ...
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