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Newly Released: 

Certified Anti-Corruption Manager — FAQ.

CACM candidates frequently ask the following questions. When you do not find the information you need, please contact us.

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The AACI launches the CACM Review Courses worldwide. http://www.theaaci.com/cacm-review.html 

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Launched: Registration for the CACM Exam Path

Tempe, AZ March 1, 2018

The Exam Unit of The American Anti-Corruption Institute launched today the official registration for the Certified Anti-Corruption Manager (CACM) Exam Path in eight countries: U.S.A., Canada, Netherlands, Kuala Lumpur, Jordan, Palestine, Qatar, and U.A.E.

CACM members are qualified Certified Anti-Corruption Manager ®©(CACM). It is the international premier professional qualification that distinguishes management possessing the required cutting-edge knowledge and skills to fight fraud and corruption from its management position.

The AACI is the only global Institute that offers such a rigorous and disciplined scheme to qualify management to fight corruption. The CACM is not technical, yet it capitalizes on the management science and the technical skills management usually has. The CACM syllabus shows the table of contents of the CACM Review textbook and the subjects that are tested in the CACM online exam.

Citizens or permanent residents of these countries applying for the CACM shall sit for the CACM online exam. To help CACM candidate study and prepare for the exam, the Exam Unit published the CACM review textbook; the only official CACM review book. The CACM review textbook covers the CACM syllabus and includes hundreds of questions.

The eligibility requirements to apply for the CACM are as follow: A CACM candidate shall

Have a bachelor degree from an accredited college or university, and

Have three years of experience in a managerial position accompanied with managerial responsibilities, and

Pass the Certified Anti-Corruption Manager ®©(CACM) ®© online exam, and

Provide an assertion to non-prior indictment in any act to the discredit of the code of ethics of The Institute, and

Abide by The AACI code of ethics, and

Satisfy The AACI continuing professional educational (CPE) requirements, and

Maintain a good standing and membership in The Institute

Read More

Register Today!

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The CACM syllabus consists of the below-stated subjects. The CACM equips management and those charged with governance with the core body of knowledge of the cutting-edge know-how and skills to enable them preventing corruption. Though the CACM is corruption prevention oriented, it empowers management to deter and detect fraud and corruption, money laundering, and financing terrorism.

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Mike J. Masoud, CPA, CACM, CFE, MBA

سيادة القانون: الفجوة ما بين الإرادة السياسية والتطبيق

مايك مسعود و د. عمر الداوود جريدة الرأي الأردنية ١٠ شباط ٢٠١٨

إننا ومن موقع المراقب والخبير، لم نُفاجأ مطلقاً من غضب جلالة الملك عبد الله الثاني المعظَّم من النتائج الفعلية الملموسة للأوراق النقاشية الملكية وما حققته من أهداف لغاية الآن من خلال ترجمتها لإستراتيجيات وبرامج عمل في كافة القطاعات الإقتصادية. وانطلاقاً من تخصصنا، فإننا سنجتهد في تناول الورقة النقاشية الملكية السادسة لإستنطاق النتائج التي حققتها على الأرض و محاولة الوقوف على الأسباب التي أدَّت لذلك، فإن أصبنا فلنا أجران وإن أخطأنا فلنا أجر.

ونود في البداية أن ن نُؤكد على حقيقة يجهلها الكثيرون وهو أنه لا يوجد حتى الآن ملك او رئيس أو أمير يمثل رأس الهرم للنظام السياسي في بلده أصدر أو أعلن شفاهة أو كتابة توجُّها سياسياً كما فعل جلالة الملك عبد الله الثاني المعظم في الورقة النقاشية السادسة. هذا ما أكده رئيس المعهد الأمريكي لمكافحة الفساد في عمَّان خلال ندوة متخصصة تم عقدها في الشهر الماضي تحت رعاية دولة الدكتور عبدالله النسور رئيس الوزراء السابق والتي أعلن خلالها المعهد الأمريكي لمكافحة الفساد اعتماد الورقة السادسة في منهاجه الخاص بتأهيل المدراء لمكافحة الفساد.

لذلك، فإن موضوعية التقييم تقتضي الإقرار بأنه يوجد في الأردن إرادة ورغبة وقرار سياسي ومن أعلى هرم في منظومة الحكم باعتماد مبادئ الشفافية والمسؤولية والمحاسبة والشفافية واعتماد نظم الإدارة الفعالة والتطبيق الفعّال للرقابة الداخلية والحاكمية الرشيدة والارتقاء بآلية اتخاذ القرار وذلك في القطاعين العام والخاص ومؤسسات المجتمع المدني. هذا بالإضافة إلى اعتماد مبدأ الكفاءة ومحاربة الواسطة والمحسوبية والفساد، وتطبيق إصلاحات ادارية وفنية في قطاع القضاء والمحافظة على فعاليته واستقلاله. اضافة الى التأكيد على مفهوم سيادة القانون وربط مفهوم الولاء والمواطنة الصالحة بمقدار الالتزام بالقانون واحترام سيادة واستقلالية القضاء ومحاربة الواسطة والمحسوبية والفساد. لقد ورد كل ذلك في الورقة النقاشية الملكية السادسة.

لإستكمال قراءة المقال، يمكنك زيارة موقع جريدة الرأي الأردنية من خلال هذا الرابط

مايك مسعود، مدير المعهد الأمريكي لمكافحة الفساد — الشرق الأوسط وافريقيا

mike@THEAACI.com

د. عمر الداود، المؤسس والمدير العام لمركز القانون والحوكمة

ofd@lawgovcenter.com

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The Board’s Anti-Corruption Intelligence

December 26, 2017

As 2017 will be closing its chapter in few days, and 2018 has many fraud and corruption scandals looming on the horizon, I contemplate the corporate of developing countries and the actual role of the board of directors in preventing and deterring corruption, money laundering, and financing terrorism. While my views in this article may look like a critique, they underscore severe flows that are permeating in most of these boards. I prefer to have my opinions be perceived as an expert advice directed to the board and its members.

Before I embark on delineating my viewpoints, I want to assert on the following points:

Organizations, listed or unlisted, are social organs. An organization’s culture is affected by the country’s culture, values, and norms in which it operates.

Prevalence of the rule of law differs from one country to another.

The political will to fight corruption differs from one country to another.

Prevalence of corruption and nepotism differs among these countries.

There are different governance regimes in these countries.

These countries have different poverty, illiteracy, and unemployment rates.

Economic growth varies among these countries

The economy of some of these countries is profoundly dependent on natural resources such as oil and gas.

The majority of local investors in these countries are unsophisticated.

In most of these countries, transparency, accountability, and integrity qualities in business dealings are poor.

The true Independence and effectiveness of the judicial system in most of these countries is, at best, vulnerable.

There are substantial doubts about the enforceability of court judgments in most of these countries.

The competence and effectiveness of regulatory agencies monitoring organizations, listed and unlisted, business conduct is poor.

The audit profession in most of these countries is at best inadequate and complicit in many countries.

Having stated that, I am aware of the environment in which the boards operate mainly in the Middle Eastern and African countries.

The board responsibility and its members’ rights and duties are primarily determined by the country’s corporate law. The board and its members must always make business and economic decisions in the best interest of the organization. For each decision, they should obtain and study all the relevant information diligently. However, board members should be competent enough to make informed decisions. But what determines the competency of a board member? A board member competency is met by fulfilling several corporate law requirements. Those requirements are beyond the scope of this article.

What I am concerned with is the board member’s anti-corruption intelligence. The American Anti-Corruption Institute (AACI) coined the “anti-corruption intelligence” 1 term to determine ” the minimum, optimum knowledge a decision maker should have to avoid fraud and corruption intelligently. Such knowledge includes the proper blend of due diligence, internal controls, anti-corruption, governance, decision making, process auditing ( from a management perspective and duties) to avoid anti-corruption and fraud.” Financial and nonfinancial information live in both the pillars of the anti-corruption concept and each of the board decisions. The critical and common sense questions are: First, do the board members of corporations (listed and unlisted) of the Middle East and Africa possess anti-corruption intelligence? Second, are they required to have a reasonable financial and business competence?

The first question. Though I could not figure out reliable and independently published stats, I have substantial doubts that board members have proper and adequate anti-corruption intelligence. Based on first-hand experience and information, these boards, in most of the cases, do not have the appropriate knowledge about due diligence, internal controls, anti-corruption, governance, decision making, process auditing ( from a management perspective and duties) to avoid anti-corruption, fraud, money laundering, and fighting terrorism.

The second question. Each of these boards relies upon its accounting and management information systems in most of its business and economic decisions. In most, if not all, these countries, organizations use the International Financial Reporting Standards (IFRS) to prepare and fairly present financial statements 2. The board should usually approve the audited financial statements before they are released. Again, the common sense says that a board member who approves the audited financial statements is presumed to know what the auditor’s report says and what the accompanying financial statements purport. Does he? Some of you may say, well, the board has an audit committee that handles the required financial and business expertise of the board. I do not believe that the audit committee waives the board members of their duties in this regard or their associated legal liability. Let me articulate on this question.

IAS 1 states that 3 “users are assumed to have a reasonable knowledge of business and economic activities and accounting and a willingness to study the information with reasonable diligence.” Even though users, referred to in IAS 1, indicates to external users of financial statements, I think that those who approve and oversee the financial reporting process should initially possess the presumed reasonable knowledge of the external users of financial statements. It seems to me that the answer to the second question becomes clear: the board members are required to have a reasonable knowledge of business and economic activities and accounting and a willingness to study the information with reasonable diligence. The anti-corruption intelligence concept includes such reasonable knowledge, as required by IAS 1. I am skeptical and have serious concerns about the board members competencies to meet the designated necessary reasonable knowledge. There are probably few organizations who are excellent and have adequate anti-corruption intelligence, but I believe they are not many.

Trying to avoid discussing the reasons underlying the boards’ anti-corruption illiteracy (accounting illiteracy included), I want to reiterate that the environment in which organizations do business have a significant bearing.

When the board members do not have adequate anti-corruption intelligence, and the board is dominated by one or two of its members, and the organization’s external culture characteristics are more or less as stated above, what would be the consequences? Though I have a short answer, let me list part of the considerable damages.

The capital allocation will be inefficient and elusive

The stock markets and exchanges will not function transparently and will not reflect the realities of the economy

There will be much-untapped innovation and productivity

Corruption, money laundering, and financing terrorism thrive

Talents leave the country, as nepotism is the norm rather than the exception

Quality of public goods and services deteriorates, and public trust in local products and services worsen

Healthcare and educational services quality degenerate

Board membership loses its substance. Individuals seek for the membership to gain a social status and probably some remuneration.

Lack of foreign direct investment. Prudent investors will not invest in organizations governed by such boards! Even when a foreign investor is on the board, the risks at stakes are high.

Despite the gloomy board characteristics I discussed above, I have no doubts that there are boards whose members are smart, ethical, and honest. Chaired by educated, charismatic individuals, those boards are trying to do all that they can in the best interest of their organizations, communities, and countries. There are many organizations in the Middle East and Africa whose leaders are open to all that may help them meet their organizational and legal duties. I can see a new breed of visionary corporate leaders and entrepreneurs in the Middle East and Africa leading by example, having adequate anti-corruption intelligence, and instilling transparency, responsibility, and accountability in their daily routine business and economic decisions. I know many of them and proud to call them friends.

I sincerely believe that only board members who have adequate anti-corruption intelligence can make a difference in preventing and deterring corruption, money laundering, and financing terrorism. Reckless, careless, incompetent boards and board members will not. On the contrary, they pose serious, relevant socioeconomic and political risks.

Finally, I wish all boards and board members in the Middle East, Africa and the rest of developing countries happy new year.

Notes:

The First Interview with Mr. L.b.Files, president of The AACI, October 3, 2017, http://bit.ly/2fTdqMB

The financial statements in this context are the general purpose financial statements as defined by IAS 1 or FASB. General purpose financial statements consist of 1- balance sheet, 2- income statement, 3- statement of changes in equity, 4- statement of cash flows, and 5- notes to the financial statements that are an integral part of these financial statements.

International Accounting Standards Board, International Financial Reporting Standards, IFRS, International Accounting Standard 1: Presentation of Financial Statements, Part A, par. 7, Page A292, 2010

Initially published at blog.theaaci.com on December 26, 2017

Mike J. Masoud, CPA, CACM, CFE, MBA The AACI Senior Director The Middle East and Africa

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Sheraton Amman, Jordan. December 6, 2017

Significant Deeds Require Significant Time

December 26, 2017

Representing The AACI and participating as a panelist and keynote speaker, Mr. L. B. Files, president of The AACI, shared his insights and relevant expertise in Amman — Jordan on December 6, 2017, on the forum entitled: Governance and the Rule of Law and their Effects on Sustainable Development and Investment. Under the patronage of his Excellency Dr. Abdallah Ensour, the former prime minister, the forum was organized by the Law and Governance Center (LGC) in cooperation with The AACI.

Delivering his written speech, Mr. Filess announced that The AACI will include the Royal 6th Discussion Paper in its curriculum of the Certified Anti-Corruption Manager management credential. Starting January 2001, CACM candidates of the U.S.A, Canada, the Netherlands, Malaysia, Jordan, Palestine, Qatar, the United Arab Emirates should pass the CACM exam to be certified.

The speech of the president received extensive media coverage. Click here.

The following is an excerpt from the speech where you may download the entire statement when you click on the continue reading below.

Significant Deeds Require Significant Time

Amman, Jordan

06 December 2017

Before I begin, I wish to thank his Excellency Dr. Abdallah Ensour and the Law and Governance Center for their warm invitation. I also wish to celebrate their courage and vision on making this world a much better place for our children, our grandchildren, and our great-grandchildren.

The speech is titled Significant Deeds Require Significant Time — because that is the truth. What we are doing, here today, is a continuation of what I saw over three years ago on my last visit, and yet, here today we are just beginning.

But, first let us begin with a simple, universal, definition of corruption.

It is a person that misuses the trust of his employer or client and acts against his employer’s or client’s interests for his personal gain.

The reasons for the abuse of trust can be for personal profit or ideological reasons.

It can be a legislator passing “special laws” for a business, or a regulator taking a pay off to look the other way. Here the politician and the regulator have misused the trust of the people for their personal gain.

It can be a buyer for commercial construction project taking kickbacks from the suppliers for buying just their concrete, steel, wiring, lights, flooring. Here the buyer has abused the employer’s trust through paying too much for goods and services so the corporate buyer can make money from the kickbacks.

It can be the owner of a business taking those same kickbacks in cash — and everyone says — so who does it hurt? It hurts both the revenue authorities as the expenses on the seller’s side are inflated, and the buyer’s income is understated, and it would hurt any lender as there have now financed too much for a building that is not worth what it is purported to be. The business owner has abused the trust of the state and the bank. Continue Reading

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When the true beneficiaries of companies or trusts are not known to local authorities and ... in a public registry, we believe that the global magnitude of money laundering, financing terrorism, and corruption will exceed USD 3 trillion during 2018. http://ow.ly/Culb30hqBP8

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Corruption, Misconceptions, Costs and Damages

Tempe, December 1, 2017; Technical Staff

This document is a part of The AACI series of anti-corruption resources made available to our CACM members. The contents of this document constitute an integral part of the CACM Review textbook that would be available in countries where the CACM will only be offered by exam.

Misconceptions About Fraud and Corruption

The following is not an exhaustive list of misconceptions about fraud and corruption that is widely spread all over the world. The lower the illiteracy, the lower the level of these misconceptions. The higher the anti-corruption literacy, the lower the level of these misconceptions.

Corruption exists only in the public sector. This is wrong. Corruption may exist in any entity of any economic sector.

A government can eradicate corruption in a short period. For example, a country can defeat corruption in three to five years. This is almost impossible. First, a state or entity will never be 100% corruption free. Second, no one estimate would fit all the situations. Third, it depends on the scope and depth of corruption. In general, a country that is faithful and dedicated to fighting corruption would need at least 12 years to start reaping the results of its corruption prevention strategies.

The political will is enough to combat corruption. This is wrong. Though the political will, at the highest level of governance, is necessary to unleash faithful corruption prevention strategies, a mere political will is not enough to prevent fraud and corruption.

A country is corrupt. This is wrong. The correct statement is that there are individuals who are corrupt.

A public perception index tells the whole story about corruption in a country. This is wrong. Any public perception index indicates the level of corruption those surveyed believe corruption exists in the country as a whole. Such an index does not provide sufficient and reliable information about the actual levels of corruption in an entity, economic sector, or the country as a whole.

Costs and Damages of Fraud and Corruption

Corruption results in severe socio-economic damages. The Secretary-General’s message on 2016 International Anti-Corruption Day described the extent of those damages succinctly.

“No country is immune, and every country bears a responsibility to end it. [corruption]

Corruption strangles people, communities, and nations. It weakens education and health, undermines electoral processes and reinforces injustices by perverting criminal justice systems and the rule of law. By diverting domestic and foreign funds, corruption wrecks economic and social development and increases poverty.It harms everyone, but the poor and vulnerable suffer most.

The theme of this year’s observance is “Corruption: An impediment to the Sustainable Development Goals”. Goal 16 urges substantial reductions in corruption and bribery and the development of effective, accountable and transparent institutions at all levels. The UN Convention against Corruption, buttressed by its peer review mechanism, is mobilizing action for honest, transparent, accountable governance, but far more is needed.”

As stated by the U.N. Secretary-General, corruption:

Strangles people, communities, and nations

Weakens education and health

Undermines electoral processes

Reinforces injustices by perverting criminal justice systems and the rule of law

By diverting domestic and foreign funds, it wrecks economic and social development and increases poverty

Harms everyone, but the poor and vulnerable suffer most

Because clandestine is the nature of fraud and corruption, its real cost is an estimate.

Members may continue reading on the membership portal.

***END***

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The AACI’s View November 13, 2017, Ban Ki-moon’s, the United Nations Secretary-General, message on the International Anti-Corruption Day on December 9, 2016 was forceful and alarming: “Corruption strangles people, communities, and nations. It weakens education and health…..No country is immune, and every country bears a responsibility to end it.” Fighting corruption is not an option; it […]

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Internal Control: What Those Charged with Governance Should Know

Tempe, October 31, 2017; Technical Staff

This document is a part of The AACI series of anti-corruption resources made available to our CACM members. The contents of this document constitute an integral part of the CACM Review textbook that would be available in countries where the CACM will only be offered by exam.

Those charged with governance should have proper and adequate anti-corruption intelligence to prevent and deter corruption and avoid negligence or gross negligence in performing their duties. 

The AACI defines anti-corruption intelligence as: 

" the minimum, optimum knowledge a decision maker should have to avoid fraud and corruption intelligently. Such knowledge includes the proper blend of due diligence, internal controls, anti-corruption, governance, decision making, process auditing ( from a management perspective and duties) to avoid anti-corruption and fraud. By avoidance, we emphasize the concept of deterrence and prevention. Corruption prevention is less expensive and better than any cure."

Internal control is a pillar of anti-corruption intelligence. Regardless of her background, a decision maker should master the concept of internal control. This mastery should include, at the minimum, the executive summary of Internal Control - Integrated Framework. 

We issued "Introduction to Internal Control" in October of this year and emphasized the importance of the control environment component of internal control. It is the foundation of other internal control components. It is unfortunate that too many decision makers and board members have misconceptions about internal control.

Delusions of internal control include, but not limited to, the following:

Internal control is the policies and procedures of an organization.

Internal control is not directly related to preventing, deterring, and detecting fraud and corruption.

Internal control is not required in small and medium-sized (SMEs) entities.

Internal control is not related to business risks.

Good governance is not related to internal control.

Strategic management is not related to internal control.

Internal control is not related to the board responsibilities.

Accountability, transparency, and responsibility are not related to internal control.

Compliance is not part of internal control.

Expenditure on internal control is a waste of resources and expense.

Internal control is static.

Internal control prevents and detects every fraud and corruption event.

The more widespread these misconceptions among decision makers of an organization, the higher the corruption risks and business failure. 

Why do we call these assertions and beliefs "misunderstandings about internal control"?

A Member may continue reading when she logs in to her account at the membership portal. Click here

.***END***

Copyright © 2017, The American Anti-Corruption Institute llc.

All Rights Reserved. No part of this publication may be reproduced, redistributed, transmitted or displayed in any form or by any means without written permission. For information regarding licensing and reprint permissions, please contact The American Anti-Corruption Institute (AACI), licensing and permissions for The AACI copyrighted materials. Direct all inquiries to copyright@THEAACI.com or to The American Anti-Corruption Institute (AACI), Attn: Manager, Rights, and Permissions, 1204 East Baseline Road, Suite 106, Tempe, AZ 85283. Telephone inquiries may be directed to (603) 235-0956.

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The AACI Membership Card

Membership Card

Dear Member, 

As a valued member of The AACI, you are now able to view, download, and print your membership card showing membership class, number, and expiration date. As we are proud of our members worldwide, The AACI continues improving its quality services to its members. Your membership card appears under the membership details heading on your profile with all your membership details filled in. From there, you can download your membership card as an image optimized for display on smartphones, or as a printable PDF. Downloading the card as a PDF allows you to print the design directly onto cardstock then cut out the card along the cropmarks that appear on the page. You should make sure you set the scaling to 100% before printing. The size of the membership cards is 88.9 x 50.8 mm or 3.5 x 2 inches when printed at 300 dpi (1050 x 600 pixels). You can reach your membership card when you log into your account and click here https://www.theaaci.net/Sys/Profile We highly value your membership at The AACI. Be proud. Sincerely, Certification and Membership Dept.; Email: certification@THEAACI.com

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The First Interview with president of The AACI. The complete interview is at http://bit.ly/2fTdqMB #corruption #governance #fraud

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The First Interview with Mr. L. B. Files, president of The American Anti-Corruption Institute (AACI)

October 3, 2017, Tempe, Arizona

As The American Anti-Corruption Institute's (AACI) journey approached five years since launching its operations in late 2012, fraud and corruption scandals continued to make headlines. Though the Volkswagen Dieselgate costs exceeded $30bn to date, and Samsung's CEO will spend time in prison for corruption charges, the corporate world does not seem to be paying attention. Corruption removed several heads of states from power, in South Korea, Brazil, a senator in the United States, UN officials and Ambassadors and, EU officials.

Despite the setbacks, or maybe because of the exposure, the global political landscape became more determined than ever to fight graft. For the first time, the United States equated the efforts of combating corruption to the fighting financing terrorism.

Fighting corruption has, in fact, became a prerequisite to fighting financing terrorism. Amid the global turmoil of corruption, the media and public relations of The AACI met Mr. L. Burke Files, the president of The AACI, at its headquarter in Tempe, Arizona to discuss The AACI's global efforts in fighting corruption, among other relevant issues.

The AACI: On behalf of our members, constituents, and advocates worldwide, we thank you Mr. Files for this opportunity to answer our questions.

Files: You are most welcome.

The AACI: As you know, corruption is a prevalent phenomenon hitting all over the world. How do you evaluate the commitment of the international community to fighting corruption?

Files: The 1977 Foreign Corrupt Practice Act, The United Nations Convention against Corruption (2005), the UK 2010 Bribery Act and those of the OECD relevant anti-corruption demonstrate an unprecedented global commitment to unequivocally fighting corruption. The most explicit U.S. message in this regard came at the May 2016 London anti-corruption summit where John Kerry, the former US Secretary of State said:  “We are fighting a battle, all of us. Corruption, writ large, is as much of an enemy, because it destroys nation states, as some of the extremists we are fighting or the other challenges we face." This proclamation changed the global landscape for fighting corruption. It tied, in public, for the first time, combating terrorism and combating corruption.

"This proclamation changed the global landscape for fighting corruption. It tied, in public, for the first time, combating terrorism and combating corruption."

The AACI: Why does The AACI focus all its efforts on executive management and those charged with governance?

Files: To answer your question, let me remind you that our founders are visionaries and responded strategically to the financial crises of 2008. The financial meltdown of 2008 shocked us though we had SOX and all the other relevant laws. When you read the report of THE NATIONAL COMMISSION ON THE CAUSES OF THE FINANCIAL AND ECONOMIC CRISIS IN THE UNITED STATES, you will find the crises was 100% avoidable. Further, that corporate of America suffered from significant weakness at the top. We found that the “tone at the top” was severely weak and at best sickened from significant lack of anti-corruption intelligence and short-term visions. We believe that the Board Of Directors and Executive Management must possess the minimum required anti-corruption knowledge and skills to enable them to meet their duties. As of today, The AACI is the only organization all over the world that targets decision makers to help them deter, prevent, and detect fraud and corruption through the methodical management anti-corruption certification program Certified Anti-Corruption Manager (CACM).

"The AACI is the only organization all over the world that targets decision makers to help them deter, prevent, and detect fraud and corruption through the methodical management anti-corruption certification program Certified    Anti-Corruption Manager (CACM)."

The AACI: What do you mean by anti-corruption intelligence?

Files: The AACI coined it to mean the minimum, optimum knowledge a decision maker should have to avoid fraud and corruption intelligently. Such knowledge includes the proper blend of due diligence, internal controls, anti-corruption, governance, decision making, process auditing ( from a management perspective and duties) to avoid anti-corruption and fraud. By avoidance, we emphasize the concept of deterrence and prevention.  Corruption prevention is less expensive and better than any cure.

Click here for the complete interview

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When an organization or a country asserts on fighting corruption, believe it for a while and give it the benefit of the doubt. Results and only results regain public trust. However, those results should be quantifiable, measurable, attainable, accountable, and transparent. Otherwise, the worse happens at all levels.

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Introduction to Internal Control

Tempe, September 26, 2017; Technical Staff

This document is a part of The AACI series of anti-corruption resources made available to our CACM members. The contents of this document constitute an integral part of the CACM Review textbook that would be available in countries where the CACM will only be offered by exam.

Internal Control

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) defines internal control in its Internal Control — Integrated Framework as:

“Internal control is a process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance.”

Elements of Internal Control Definition

Internal control

Is a process. Process means related and interdependent tasks. It is ongoing tasks and activities — a means to an end, not an end in itself. For example, a sales department would approve a credit sales invoice when management already approved dealing with the customer and granted it certain credit terms. The management decision also relied on a due diligence report carried out by another department of the organization.

Effected by an entity’s board of directors, management, and other personnel. It is the responsibility of those who are charged with governance to establish and maintain systems of internal controls. However, those who are charged with governance should ensure that each member of the organization understands his role and duties with respect to the systems of internal controls.

Applies to any entity irrespective of its size, industry, geographical location, or legal structure ( for- profit, not-for-profit, and to any governmental unit). It also applies to each department and unit in any entity.

Read more

Objectives of Internal Control (IC)

The COSO definition of IC states its objectives. They are:

Operations Objectives — These pertain to effectiveness and efficiency of the entity’s operations, including operational and financial performance goals, and safeguarding assets against loss.

A system of IC should enable management at all organizational levels with operational information to enable them to carry out their IC duties. Such information could be financial and non financial. For example, budget variance reports are financial operational reports while electricity consumption per employee is a non financial operational report. Operations information should be relevant, accurate, reliable, timely, and complete.

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Internal Control Benefits

IC enables organizations to effectively and efficiently:

Achieve the entity’s strategic business objectives and help in strategic planning,

Adapt to changing business and operating environments,

Identify and analyze risks, and to develop and manage appropriate responses to risks within acceptable levels and with a greater focus on anti-fraud measures.

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Internal Control: Components and Principles

Internal control consists of five (5) components and seventeen (17) principles. Each component has its own principles. Read more

Internal Control Deficiencies

A major deficiency exists if an internal control deficiency or combination thereof severely reduces the likelihood of an entity achieving its objectives.

In other words, if management used its professional judgment to determine that a control objective isn’t being met because a relevant principle or associated component isn’t present and functioning, or the five components aren’t operating together, the entity has a major deficiency. Though the 2013 COSO Framework uses and defines the terms deficiency and major deficiency, management should use relevant criteria as established by regulators, standards-setting bodies, and other relevant third parties for defining the severity of, evaluating, and reporting internal control deficiencies when reporting under those regulations or standards. Read more

Internal Control Limitations

The COSO Framework recognizes that while internal control provides reasonable assurance of achieving the entity’s objectives, limitations do exist. Internal control cannot prevent bad judgment or decisions, or external events that can cause an organization to fail to achieve its operational goals. In other words, even an effective system of internal control can experience a failure. Limitations may result from the:

Suitability of objectives established as a precondition to internal control

Reality that human judgment in decision making can be faulty and subject to bias

Breakdowns that can occur because of human failures such as simple errors

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Elaboration on the Control Environment Component

It is intangible and subject to rationalization and probably justification. It is a tricky and challenging component to assess and evaluate its effectiveness. It also establishes the tone at the top set by those charged with governance in the organization.

Outrageous family business fraud like that of Parmalat and the tone at the top issues in AIG, Inc., and Disney show that all kinds of entities are subject to risks attributed to the tone set by executive management.

Those charged with governance should communicate the organization’s ethical values and expectations through policy, code of conduct, or statement of ethical values. The organization should periodically ensure that employees and management alike understand it. The real value of a policy, code of conduct, or statement of ethical values is not in its well-structured and articulated text; it is in the organization behavior towards suppliers, customers, creditors, and all stakeholders. Day-to-day management ethical business actions are what matters.

Effective oversight of the organization business conduct presumes that those charged with governance understand the organization business, business processes, operations, risks, and objectives. Members of a board of directors or an elected body should exercise prudent role and ask the right informed questions. An effective board of directors of a proper structure is crucial to the control environment. It is not surprising that the organization’s governance system is a part of the control environment. ….

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