Tone at the top is a very interesting predicament for management. It means to create an environment where illicit activity is not only frowned upon but constantly discouraged by the upper management of an organization. The tricky part is having an environment that discourages illegal or fraudulent activity while creating a culture that employees enjoy being a part of. Tone at the top also means an environment that encourages employees to feel comfortable enough to come forward with claims of fraud. It’s not hard to see the dilemma for upper management in this situation.
Regardless of the size of your organization the benefits of a strong tone at the top are plentiful and immeasurable. Auditors are extremely cognizant of the relationship between tone at the top and risk factors for fraud, or unintentional material misstatement. More importantly a strong tone at the top sets the table for the behaviors of every employee in an organization and ensure ethical behavior. Ensuring that your organization has a strong tone at the top is not overly difficult, especially in comparison to the benefits you can objectively observe. The ACFE wrote a wonderful research paper on tone at the top here.
The big question is how to behave as a manager so that you ensure a strong tone at the top. First, you have to, obviously, walk the walk. Telling someone how to act is one thing, but leading by example is another. Tone at the top means that you have to behave with respect and act with integrity. It also means you have to take every report of fraud seriously but treat it with professionalism and procedural justice. In order to have great tone at the top your employees should observe you behaving in the manner in which you’d want them to behave. Lastly, in order to ensure a strong tone at the top is to avoid the appearance of preference, bias, or impropriety regarding the aspects of the organization and its employees.
For information on testing you organizations tone at the top, check out this article by Deloitte/Wall Street Journal on measuring tone at the top.
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