The competitive nature of business requires managers to consistently work towards eliminating unnecessary costs and improving financial management. Worldwide, fraud remains a pervasive and expensive problem for businesses. Fraud involving misappropriation of assets (commonly referred to as embezzlement) and fraudulent financial reporting cost organizations trillions of dollars worldwide. To better understand the most effective ways of combating misappropriation and to a lesser extent, fraudulent financial reporting, this paper evaluates research and reports the results of expert interviews with accountants, forensic experts, and security specialists.

The Olympus case gives students an opportunity to analyze the factors and unique cultural environment that led to the accounting fraud in whistle blower Michael Woodford's perspective. It also provides students insights into a traditionally- structured Japanese company to identify the operation style and leadership distinctions from a U.S. structured company. The case is presented from the comprehensive public record and the book How I Went from CEO to Whistleblower, written by Michael Woodford, all surrounding the Olympus fraud and insider whistleblowing. A primary question that arose when the news of the fraud emerged in the media was: Did the accounting fraud solely result from the failure of Japanese executives' leadership style? Some people think that the Olympus president Tsuyoshi Kikukawa who owned ultimate power over the company is supposed to bear the most responsibility for this issue. However, this case argues that the answer to the previous question is no. What's more important than the corrupt executives is Olympus' operational system that indulged those executives' ambition. Therefore, the case focuses on an analysis of the operating system in regard to leadership, culture, internal controls, external controls and the board of directors. This analysis addresses the failure of Olympus comprehensively rather than placing blame on a single individual. It is an opportunity for students to understand and discuss the multiple aspects of a corporate system that should have the practicable controls and functions to prevent the abuse of decision-making power as well as the illegal activity from occurring.

Community associations have become more prevalent in recent years. In 1964, there were fewer than 500 such associations across the United States (At-a- Glance Look at Homeowners Associations and Conflicts). As of 2003, that number had skyrocketed to about 249,000 associations (At-a-Glance Look at Homeowners Associations and Conflicts). That number further increased to about 300,000 associations by 2010 (Ross). The majority of these entities are located in Arizona, California, Florida, Texas, Nevada, and Hawaii (At-a-Glance Look at Homeowners Associations and Conflicts). Community association members are required to pay assessments. One half of these monthly assessments were between $100 and $200 in 2003 (At-a-Glance Look at Homeowners Associations and Conflicts). In 2003, the total annual revenue of United States associations was between $30 and $35 billion dollars (At-a-Glance Look at Homeowners Associations and Conflicts). Due to the large revenue inflows, lack of controls, and an atmosphere of trust, these organizations are susceptible to fraud. Lapses in control relate to issues of a lack of segregation of duties, check writing policies, detective controls such as budgets, and other related controls. Limited fraud controls are sometimes a byproduct of the atmosphere of trust. This atmosphere of trust is probably in part a result of the association's communal orientation as association members can assume that their neighbors have the community's best interest in mind. But this is not necessarily the case. Fraud is an activity which, in 2006, cost United States businesses approximately $652 billion dollars (DiNapoli 2). On average, the cost to protect organizations from fraud and abuse is estimated at between five and seven percent of their annual revenue (DiNapoli 2) (Ratley 8). This thesis explores best practices that small and large community associations can employ to deter such fraud. First, this thesis provides background information regarding community associations, including their structure and surrounding laws which are pertinent to understanding their relationship with fraud prevention. Next, fraud basics are discussed to address the motivation, organizational attributes, and personal characteristics common to this act. Then, examples of community association fraud are discussed to underscore the importance of establishing anti-fraud controls. Finally, best practices are discussed to help community association members and directors enact policies to curb this costly act.