How Small Personal Loans Can Wreck Your FAO
Financial Accounting Outsourcing or FAO is currently experiencing another year of robust business, which has increased competition both among small personal loans and offshore companies. FAO is one of the widely acceptable moves a company takes to lower expenditure by sending work out instead of hiring several people to handle the business accounting needs.
As a result of the jostling for new and renewal of contracts, there have been reports of bribery and corruption among emerging markets, which are, needless to say, extremely tempting. In the 2012 Global Fraud Survey released by Ernst & Young on 43 countries and 1,700 top executives, 15% said that it was okay to bribe customers in order to keep the business wheels turning. Two years ago, this same question showed a 9% positive response, which means an increase in the willingness of top executives to give out online car loans in return for new or renewed contracts.
Of the countries surveyed, the North American top executives are the least likely to be willing to accept bribes, although they lack an in-depth understanding of the risks on third party liabilities. In outsourcing financial and accounting contracts, firms have to be extrajudicial about protecting themselves from third parties acting as proxies. They can use software and advanced technology to detect and prevent fraud that may affect their business. They should also be careful about people with bad credit who they select to operate their FAO.
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The software used to detect and prevent fraud, corruption, and bribery uses forensic data analysis as one aspect of the regulatory process. It acts like an ongoing 24/7 audit that can spot critical poor credit history in the system so it can be plugged immediately.
Top executives are encouraged to know more about the Foreign Corrupt Practices Act and potential landmines it can step on in terms of compliance. It pays to know how to spot a bribe and question procedures that are unfamiliar. On the other hand, it would be an excellent idea to also consider outsourcing to a company that has a reputation for integrity and detests for anything “under the table.” This is one of the reasons Japanese accounting firms are highly regarded and recommended. The majority of Japanese professionals adhere to a strong sense of business ethics and would never consider the use of loan calculator.
Currently, an article published by Harvard Business Review last September reveals that while bribery is pervasive among emerging markets, each country has severe penalties. The top 2 countries with the highest reports are Russia (11%) and China (8%).
The three recommended tests that could be adopted as SOP by top executives are:
1. The Sniff Test –Too quick, too easy to get approval
2. Anonymous surveys on employees
3. Regular Compliance Reports
In addition, it would be a good idea to assess the representative of the FAO company personally and be convinced that there is no pressure to do the right thing. Rather it should be a matter-of-fact during the negotiations with no grey areas avoided.