What is the primary goal of an entity's fraud policy?

The primary goal of an entity's fraud policy is to create awareness and provide guidance on preventing and reporting fraud. A well-structured fraud policy is essential because it establishes a framework that educates employees and stakeholders about the importance of fraud prevention and detection. This policy outlines the organization’s stance on fraud, details the procedures for reporting suspicious activities, and fosters a culture of transparency and accountability.

By emphasizing awareness, the policy helps reduce opportunities for fraud to occur and encourages employees to be vigilant and proactive in their roles. When staff understands the risks of fraud, as well as the mechanisms for reporting concerns, the organization is better positioned to mitigate potential losses and foster an ethical working environment.

Although compliance with government regulations is important, and reducing losses can indirectly relate to profitability, these are not the primary focus of a fraud policy. The fundamental objective is to create a preventive framework that informs and empowers individuals within the organization to act against fraudulent activities. Minimizing fraud incident reporting is counterproductive to the policy's goal, as reporting is vital for transparency and improvement of fraud prevention measures.