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Fraud Prevention Tip #19: The Importance of Effective Screening

Terry’s hand shot up. “I’ve heard our internal auditors talk about the need for ‘effective screening’ for years – but no one seems willing to go into detail about what it means. What should I be doing? What specific actions should I take?”

Great questions from a truly concerned supervisor. So let’s break it down for her and for you.

The anti-fraud control of effective screening covers fact and background checking on people, business relationships, commitments and transactions. For example:

  1. New employees. Screening includes verifying all relevant details of the person’s background, experience, education, references, certifications and any
    Fraud Prevention Tip #19: The Importance of Effective Screening

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    anything else relevant to allowing them into your trusted employment environment. It includes checking for prior criminal or other wrongdoing activity in a meaningful way (consistent with the law), and even financial background (again, consistent with the law). Every detail – because once you let them in and add them to the payroll, they are implicitly part of your internal controls.

  1. Experienced employees. You might also want to double check the backgrounds – especially criminal backgrounds – of existing employees who are about to be moved into sensitive or otherwise high risk positions. Examples include moving your general ledger accountant into the wire transfer group. As allowed by law, custom and work rules, it’s always a good idea to re-screen employees who move up or over to higher-risk positions. Why do we do this? Simple, because people change. Often for the better. Sometimes not. We’ve all seen the stories of the 20-year employee or politician who ‘suddenly’ changes and commits wrongdoing.
  1. Third-party relationships, especially new vendors, suppliers and contractors. These folks all have one thing in common. We allow them into our control environment to provide goods or services, but they have half of the records! Check out new vendors, new contractors and new suppliers. Run their businesses and leaders through Internet and news databases See what they are known for: outstanding service and charity work, or overcharges on a government project.
  1. Long-term vendors, suppliers and contractors. You may have relied upon a sole vendor for many years. Well, screen them again. Screen every 3 years as if you didn’t know them before. Double-check their integrity. Make darn sure you’re looking at long-term contractor and supplier relationships in the same way as they if you hadn’t met these people before today. Just like with employees, we do this because businesses change with pressures. Again, often for the better. But sometimes not. Here’s a good idea that relates to all third party suppliers and contractors. Each year, have them certify compliance with your Code of Conduct. Make it part of your core deal with them.
  1. Significant Commitments – like new loans, leases, partnerships and other major commitments. Let’s screen who the partner is, who the other entity is, who the bankers are that we’re borrowing money from, and who the new investor is. What are the issues around their reputation that should be considered before we make significant commitments and expose our reputation?
  1. Transactions. Last, and perhaps most important – screen transactions. Especially transactions resulting in someone getting paid. If you are reviewing a travel expense reimbursement, what questions should you be asking yourself before you approve that document? How about invoices, wire transfers, time sheets, loans, and any other documents that cause funds to be disbursed. What information should we be running through our ‘approval screens’? Start with this simple acronym: HDIK? How do I know this piece of paper in front of me right now is correct? Should I put my good name on it, and why? Such basic questions. Such powerful results.

These are just a few examples of everyday business scenarios where the concept of screening comes into play. Be creative when screening people, supplier and transaction approval decisions. Always be thinking, what do I need to know to make a better hiring, contracting, payment or relationship decision. Find and analyze that information. That’s what effective screening is all about.


John J. Hall, CPA

John J. Hall, CPA

John J. Hall, CPA, is an author, speaker and results expert who presents around the world at conventions, corporate meetings and association events. Throughout his 35-year career as a business consultant, corporate executive and professional speaker, John has helped organizations and individuals achieve measurable results. He inspires audience members in corporations, not-for-profit organizations and professional associations to step up, take action and “do what you can.”