How to Report Fraud Within a Public Company

Since the passage of the Sarbanes-Oxley Act in 2002, people reporting fraud within a public company have enjoyed legal protection as whistle-blowers if they experience retaliation for their actions. Most of those reporting fraud begin locally, calling the company's fraud hot line or internal investigators first, who may elevate it to the next level of management, such as the audit committee of the Board of Directors. If these actions have not been successful in stopping the fraud, some whistle-blowers have reported the fraud to federal authorities or the media.

Things You'll Need

• Evidence of the fraud
• Company phone directory

Instructions

1. Determine if your company has a whistle-blower policy or a hot line for reporting fraud. If such a policy or hot line exists, gather evidence of the fraud and report it to the appropriate person, email or voice mailbox.

2. Study your company's organizational chart, if it does not have a formal reporting mechanism for fraud, and look for a department that may be appropriate, such as internal audit or compliance, and call them to see if they will take your report. If an anonymous reporting option exists, you should use it if you have a reason to think you'll be retaliated against in spite of Sarbanes-Oxley's legal protections.

3. Consider reporting the fraud to the audit committee of the company's board of directors if, after a month passes, there has been no resolution and the fraud continues to occur.

4. Consider taking the issue to the U.S. Securities and Exchange Commission (SEC) if the audit committee does not investigate and the fraud persists. You can contact the SEC at http://www.sec.gov/complaint.shtml. Your complaint is more likely to be taken seriously if you identify yourself; however anonymous reporting is allowed.

Tips & Warnings

• If the fraud has reached the highest levels of management, internal efforts to report fraud may not prove effective. However, it may take some time to discover this.

• If possible, keep any original documents proving the fraud.

• Although you have legal protections as a whistle-blower, be prepared to face some difficulties at work if you report the fraud to the SEC or the media.

References

• CPA Journal

Resources

• SEC Complaints website