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Studies* provide evidence that anonymous tips are the most common and effective method for detecting fraud.

The Sarbanes-Oxley Act of 2002 mandated the use of anonymous reporting mechanisms for employees. Public and private companies alike are now realizing the benefits of using one of the most common reporting methods available - whistleblower hotlines.

The AICPA Antifraud Programs and Controls Task Force, in recognition of these benefits, recently provided specific guidance on developing an effective reporting system.

Highlights that may be of interest include:

  • Does the hotline demonstrate confidentiality, including showing how caller ID, e-mail tracking, and other technologies cannot be used to identify the whistleblower? 
  • Has the entity considered use of an independent hotline operator to enhance the perception of confidentiality in addition to any real improvement?  
  • Are callers provided with a unique identification number to enable them to call back later anonymously to receive feedback or follow-up questions from investigators?
  • Does the entity support outreach to potential stakeholders other than employees, such as suppliers and customers? (The ACFE reports that approximately 1/3 of tips come from sources outside the Company.)
  • Does the entity effectively distribute comprehensive educational materials and training programs to raise awareness of the hotline among potential users?

*For more statistical information about occupational fraud and abuse, you may access the 2006 Association of Certified Fraud Examiners (ACFE) Report to the Nation.

If you have questions about whistleblower hotlines or would like to discuss other fraud prevention and detection techniques, please contact Darren at 717-757-6999 or 800-745-8233, or email Darren by using the form below. You may also view our Risk Management services at the Stambaugh Ness website.
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

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