Tuesday, January 10th, 2012
Did you know that it is estimated that the typical organization loses 5% of its annual revenue to fraud? Did you also know that 75-98% of college students admit to having cheated in academics compared to only 20% back in 1940? And did you know that these two variables are more than likely correlated with each other?
I recently had the pleasure of speaking to Hollywood Hills High School‘s Advanced Placement Government class taught by Larry Neuschaefe about my profession as a forensic accountant and the connection between their world and mine. More importantly, the students and I explored how cheating and plagiarizing in high school and college often leads to fraud in corporate America.
As I explained to the students, there are three components, which when combined together, increase the likelihood of fraud. In the corporate world, these three components are known as the “Fraud Triangle” and include:
- Pressures – examples of financial pressures include mounting bills, loss of employment, or depletion of a nest egg due to poor economic conditions.
- Rationalizations – human nature orchestrates excuses for indecent actions and behavior, allowing a person to justify their actions.
- Opportunities – these often stem from missing or inadequate internal controls, such as the person approving check being the same individual as the one who writes it.
I proposed to the students that the elements of the Fraud Triangle – pressures, rationalizations, and opportunities – are also applicable to them as students. I also suggested that the behavior patterns they become accustomed to today may influence future behavior beyond school.
Students face pressures to score high grades, please parents’ expectations, and compete against fellow classmates to be accepted into top tier colleges. Rationalizing seems to be easy; after all, isn’t everyone doing it? And, thanks to the Internet and other electronic forms of social communication, the opportunities to plagiarize and cheat have never been greater.
If students are comfortable with this type of behavior in high school and college – during the critical formation years of their life – how will they respond to the increased pressures of corporate America and the challenges of “real life?”
In today’s society, driven by materialist values, instant gratification, and increasing financial stress, it’s critical to educate our future leaders on the importance of where their current actions may lead them. By investing the time to teach students about business and life ethics, we may be able to positively affect the future of our business environment and landscape.
Students seem willing and eager to learn about these real-world dilemmas. After receiving countless “thank you” letters from the students I spoke to, it’s apparent that students are listening, absorbing the lessons, and starting to see the dangers of cheating beyond the classroom. We can only hope that this may, in turn, reduce the number of fraudsters in tomorrow’s corporate America.
Below are just a few quotes that I received from this class.
“As teenagers, we look over “small” things such as cheating and stealing now, but we don’t really realize that our actions could lead to bad habits in the future.” – Samantha
“Craig Hirsch taught us life lessons in less than an hour just by correlating fraud in business to fraud in education.” – Aylin
“Merging the two worlds of education and real life, Mr. Hirsch provided us with a better realization of the necessity of a true education.” – Sophia
“Thank you for opening our eyes to the dangers of cheating. I think every high school student in the country should have a speaker like you come to their class.” – Emily
“Mr. Hirsch was excellent at providing a “bridge,” if you will, from his career and life to the life of high school students. He was fantastic at putting things in terms for us and did a great job of educating us about types of fraud and what leads to fraud actions.” – Sarah
“The fact that most cheaters or plagiarizers in high school and college tend to be the ones who commit frauds as adults made a lot of sense, and without Mr. Hirsch, I probably would not have made the connection. Knowing the reasons people commit fraud, in my opinion, can help young adults avoid doing so and falling victim to feeling, for example, the pressure of committing fraud.” – Vanessa
Craig Hirsch is a manager in the Forensic and Regulatory Compliance consulting practice at Kaufman, Rossin. Craig specializes in forensic accounting, anti-money laundering and counter terrorist financing, financial intelligence, corporate investigations, dispute consulting, and fraud risk assessments. Kaufman, Rossin & Co. is one of the top CPA firms in the country. He can be reached at email@example.com.
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