Fraud Prevention Tip #24: When in Doubt, Doubt!

In business, there are believers and doubters – and believers don’t prevent much fraud. Here are two quick examples of believers to illustrate our theme:

• James thought the invoice amounts and prices looked unusual. Even the document itself had obvious erasures and hand-written notations over the computer generated details. But he knew his firm had used this supplier for over five years, and many of the previous invoices were sloppy and needed correction as well. So he approved the document on his desk and headed for home.

• Sally was responsible for managing payroll accounting for over 700 hourly employees at a dozen locations. Every month, service technician Michael Peterson was the employee who reported the highest overtime. It wasn’t even close! But his work location was over 1,000 miles away, and he supposedly spent most of his time in the field at customer locations. Yes, his hours were more than unusual, but who was she to second-guess what she was seeing. On top of that, Sally’s boss had just criticized her for being too slow with the data entry work. So she typed in the high hours and moved on.

James and Sally are believers. They are in a great position to notice what’s normal and what isn’t. In both cases, they see something strange, odd or curious in their work, but they choose to believe what they see. Result: two frauds continue for over a year longer.

What would a doubter do? A doubter sees something that catches their attention. Odd hand-written corrections on a computer generated invoice. Extremely high overtime compared to others in the employee’s peer group. A red flag compared to what they know from experience. And a doubter ‘stops the presses’ and follows up.

No way are they going to risk their reputation by approving or processing something that looks or feels funny. Doubters resolve the suspicion or refer the unusual document or behavior to those charged with auditing or investigation. They think, “Maybe I’m wrong, but I’m not taking the chance.”

Doubters prevent fraud. Doubters detect fraud.

Here’s how to be a doubter.

1. If something looks or feels wrong to you in your area of responsibility, it probably is. You are in the best position to know. Stop the presses!

2. Follow up to determine the true cause of indicators and behaviors that concern you.

3. If you’re not sure, check details if you can.

4. If you’re still not sure or simply do not want to get personally involved, get help. Refer suspicions to others for resolution.

Doubters prevent fraud. Be a doubter, and tell your staff to doubt, too.

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.”