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How JCPenney is Managing Corporate Risk. John Polarinakis, Audit Director Dave Miller, Senior Audit Manager.

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Presentation on theme: "How JCPenney is Managing Corporate Risk. John Polarinakis, Audit Director Dave Miller, Senior Audit Manager."— Presentation transcript:

1 How JCPenney is Managing Corporate Risk

2 John Polarinakis, Audit Director Dave Miller, Senior Audit Manager

3 What is JCPenney doing?  Ethics Program  Internal Audit Function  Anti-Fraud Programs  Enterprise-Wide Hotline

4 On-line Ethics Statement  A letter from our Chairman  The purpose of the Statement of Business Ethics  Our responsibility as an employee  A great work environment  Our duty to the Company

5 An Effective Ethics Program  Communication with Employees  Communications with Suppliers  Employee Training  The Use of Criminal Background Checks  The Role of the Legal and Ethics Compliance Committee  Measuring our Performance – how effective are the programs

6 How does Internal Audit support the Company’s corporate governance initiatives?

7 Perform an Annual Risk Assessment  Risk rank each audit area  Discuss with management  Allocate resources  Allow for flexibility

8 Fashion Triangle for Internal Auditing

9 Anti-Fraud Programs  Fraud Risk Assessment  Fraud Awareness Program  Continuous Auditing and Monitoring  Enterprise-Wide Hotline

10 Objectives of Fraud Risk Assessment  Evaluated the adequacy of select controls to mitigate fraud risks  Reviewed the oversight processes to prevent and detect fraudulent activity  Identified additional anti-fraud control enhancements

11 Benefits of Fraud Risk Assessment  Interaction with management  Increasing management’s fraud awareness

12 Business Process Owner Fraud Schemes/Scenarios ControlsMonitoring StoresTheft of merchandise  Store access is secured and alarmed when not receiving merchandise or during “off” hours.  Hotline established for use by employees to report theft issues.  Written procedures related to physical security, shoplifting, and internal employee theft. The following areas monitor these activities:  Store, District and Regional Management  Store, District, Regional and Home Office Loss Prevention  Internal Auditing Fraud Risk Matrix

13 Increasing Fraud Awareness  Established multi-department task force to oversee  Conducting awareness and ethics presentations  Red Flags of Fraud poster  Senior Management presentations to Audit Committee

14  Continuous Auditing  Continuous Monitoring

15 Monitoring Retail Store Operations  Short cash expense  Bad check expense  Purchase card expense  POS information

16 Anti-Fraud Continuous Auditing  Matching vendor and employee name, address and telephone number  Identifying duplicate vendor invoices  Identifying duplicate expenses – travel

17 Establishing an Enterprise-Wide Hotline  Required as part of SOX 301 and 806  Means of anonymous communication for employees and vendors  Establishing Awareness programs  No Retaliation Policy communication

18 Benefits of Outsourced Program  Online database of all call activity  Automatic notification of call activity  Available 24/7  Multi-lingual service  Experienced operators  Call monitoring

19 Steps to Take  Communicate what is expected of employees  Provide a safe mechanism to report concerns  Zero Tolerance for fraud

20 Questions?


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