ABSTRACT
This chapter explains the legal and other standards that directors and employees must maintain to discharge their responsibilities: these are worrying and becoming increasingly more onerous. It also explains the policies and processes needed to motivate humans to behave honestly. The success of many policies and procedures comes down to effective interviewing and asking the right questions at the right time including: recruitment; annual appraisals; termination of employment; pre-qualification of vendors; business meetings and negotiations. The chapter describes the categories of control. There are divisions within the categories of environmental and specific controls: intelligence and risk analysis; familiar and unfamiliar risks; preventive controls; reactive controls; and reconstructive controls. Not all risks can be prevented and thus reactive controls monitor performance, detecting deviations from the norm that may be symptomatic of fraud. Burglar alarms or processes such as reporting of incidents procedures are examples of specific reactive controls.
