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CONFIDENTIAL

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THE FRAUD DIAMOND�A SOCIETAL CONSTANT

CONFIDENTIAL

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WAGING THE WAR�FIRST LINE OF DEFENSE

CONFIDENTIAL

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WHISTLEBLOWERS

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  • Most effective at identifying and exposing fraud as they are firsthand witnesses
  • Assuming the greatest amount of risk, personally and professionally
  • Some jurisdictions have whistleblower incentive programs which have proven effective

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WAGING THE WAR�SECOND LINE OF DEFENSE

CONFIDENTIAL

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AUDITORS

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  • Duty-bound to investigate possible fraud concerns, but the audit scope is defined by the client so the fraud may not appear or be purposely obfuscated
  • Auditors are paid by the companies themselves and often have longstanding relationships which can result in relaxed scrutiny

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WAGING THE WAR�THIRD LINE OF DEFENSE

CONFIDENTIAL

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JOURNALISTS / SHORTS

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  • Journalists have a reputational incentive to thoroughly investigate and accurately report on fraud
  • Short sellers have a financial incentive to do the same as information discovery will lead to price discovery, and profit
  • Both face risks due to the tactics employed by companies