Fraud Prevention Tip #50: The Three Key Components of an Anti-Fraud Program

Fraud Prevention Tip #50: The Three Key Components of an Anti-Fraud Program

Somewhere out there, your organization is probably being targeted for fraud right now. Internet-based hackers, international organized crime organizations, and even a small percentage of employees all see your assets and information as too tempting to ignore.

But what are the three most important things you must do to deter these barbarians at the gate – or already inside your business?

Fraud Prevention Tip #50: The Three Key Components of an Anti-Fraud Program

How to Prevent Business Fraud: 8 Ideas That Work

The goals of anti-fraud efforts are prevention and immediate detection. While no anti-fraud system is foolproof, the 8 ideas in this program are critical to managing fraud risks in your business. And there is a cumulative effect – the more of them you apply in your business, the greater the chance of success. Providing turn-by-turn instructions for business leaders and owners, this program is short on theory and long on practical ‘how-to’ instructions on what you should do and what gets in the way. You’ll benefit by building a stronger defense against the risks of wrongdoing, misconduct, theft and outright fraud. Using the tools, checklists, talking points, and sample anti-fraud policies included in the program, you’ll be able to apply the ideas right away with minimal cost and maximum effect.

Managing business fraud risks requires your daily attention. It’s a ‘cat and mouse’ endeavor where the smarter we get, the harder they have to work to get us. While there are many prevention and deterrence steps you can take, here are three critical components of any business anti-fraud program.

1. Build a culture of honesty within your organization.

Ethics starts and ends with the actions of leaders. From the boardroom to the factory floor, every leader must not only talk, they must demonstrate exactly what ethical behavior looks like in their business habits. And the CEO must personally lead the pack.

Formalize the rules of acceptable behavior in a Code of Conduct. Be clear about what is not allowed as well. Address confidentiality, harassment, use and protection of intellectual property, avoiding conflicts of interest, and other ethical issues. Tell people what you expect of them. Be clear about relationships with third-party suppliers, customers and contractors.

2. Perform a meaningful fraud risk assessment, and brainstorm how to mitigate fraud risks.

Fraud risk assessment starts with an open discussion of what can go wrong. Bring it out into the open. Recruit every employee into the brainstorming process. Address theft, manipulated financial and operating results, and shadow deals with third parties.

Make sure every employee knows what can go wrong in their areas of responsibility, and tell them it’s their job to make sure fraud doesn’t happen on their watch. Help them implement or strengthen anti-fraud controls. Openly recognize their positive deterrence behavior.

3. Provide useful anti-fraud skills training.

Creating a culture of honesty and ethics is step one; step two is fraud risk brainstorming. But none of it matters without useful anti-fraud skills training.

Many organizations speak to their staff about fraud awareness. But if you are expecting them to fight fraud, you have to go much further and show them exactly what fraud looks like in the transaction records they see every day. There’s simply no short cut to meeting this essential need. Yet this is the one step that most business organizations skip.

Provide anti-fraud skills training in a classroom setting, in small staff meeting discussions, in organization newsletter articles, and using webinar, conference call and other simple technology (Skype, Apple FaceTime and others). Most effective of all but often overlooked is one-on-one coaching of staff by supervisors at every level.

Don’t keep fraud examples hidden from your team; bring what can go wrong out into the light where all can learn and react appropriately. Help them be successful in meeting your fraud risk management objectives. Encourage them to speak up and make it as safe as possible to report suspicions.

If you have questions about what you should do to fight fraud exposures in your organization, just let me know and we’ll talk it through.

Call me at (970) 926-0355. Or email John@JohnHallSpeaker.com and we’ll get the discussion started.

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 38-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.”

 

 

board members

Fraud Prevention Tip #41: Train Your Board Members

There is an assumption that once an individual is accepted into a Board position, they are qualified to provide governance oversight of the organization’s anti-fraud efforts. But for most Board members, nothing could be further from the truth.

History is filled with examples of corporate corruption and fraud at the highest levels that occurred right under the noses of the Board. And it’s not just highly-publicized for-profit organizations that are at risk. School districts, not-for-profits, municipalities, credit unions, universities, private foundations, family run businesses and dozens of others are at risk due to inadequate fraud risk management skills at the Board level.

Whose job is it to train Board members and bring their Fraud Risk Management skills up to speed? Strange as it may sound, it’s management’s job.

The Anti-Fraud Toolkit Structure

The Anti-Fraud Toolkit Structure | Module 2 – Leadership

The message of this module is simple: Nothing will happen without strong, visible, vocal executive leadership. And by ‘executive’ I mean the Chief Executive Officer – whatever their title may be in your organization.
The #1 executive must lead the anti-fraud charge. They must be willing to speak publicly and enthusiastically. They must provide you with the resources you need to initiate and sustain your anti-fraud initiative. They must embrace that fighting wrongdoing and fraud is a campaign waged over time with their continued support. It is not a once and done event that receives encouraging words but no meaningful follow-though. Your #1 job as an anti-fraud leader is to recruit and secure meaningful executive leadership support. Module 2 – Leadership will give you the specifics details of what you will need from the executive management team.

Here are three specific areas where the Board must be up to the task.

1. Oversight of the Organization’s Anti-Fraud Efforts

The Board must ensure that management has done a competent job of identifying fraud risks and putting into place effective controls and behaviors to mitigate those risks. And not just the risk of financial misstatement that consumes so much of Board and management efforts. They must also monitor the risks of significant misappropriation, misstatement of non-financial results, and corruption and shadow deals – especially where it relates to bribery of domestic and foreign officials. Of course the recent uptick in cybercrime and other exposures in the technology arena has even the best anti-fraud Board members squirming in the seats.

2. The Risk of Senior Management Override of Controls

It’s been proven too many times to count that no one in the employee ranks can survive taking on senior management when collusion at the top causes controls to be overridden and fraud to be perpetrated. Not even the Chief Internal Auditor or Chief Counsel. They may have legal remedies when they are fired for challenging the CEO, but no one I’ve ever encountered who has taken this route would do it again willingly. Only the Board can step in when the most senior executives are determined to cheat. That’s one of their key governance roles, and one of the fundamental reasons why the Board exists. To monitor and counterbalance senior management when needed.

3. The Risk of Fraud For the Organization

Not all fraud directly harms the organization, at least initially. Some schemes actually bring substantial benefit to the organization and its leaders. Intentionally misstating the safe use of products, illegally dumping toxic substances, and hiding the harmful effects of food additives and chemicals used in the home are just three examples. Board members must be aware of fraud and other wrongdoing that benefits the organization, and be willing to take effective steps to prevent these risks from ever happening.

Of course, there are many other Fraud Risk Management challenges that all Board members must accept. You can help by teaching them what they need to know and do.

We can help as well. Take a look at our strategic partner for Board quality and effectiveness. The Center for Strategic Business Integrity was recently formed specifically to improve the quality of oversight by Board members and their Trusted Advisors. Take a quick look: www.CenterSBI.com. Might be just what you need.

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.”

 

 

Signatures without thought

Fraud Prevention Tip #36: Approving Invoices – Good Questions to Ask

One of the most common and important management steps is the review and approval of invoices from suppliers, contractors and service providers. Yet few organizations provide meaningful training on how to review invoices. What to check, where to find the needed information, and what to do when something looks strange, odd or curious to the reviewer.

Here’s some suggested content for publishing an article for your employees covering what to think about at the moment of invoice approval.

Good Questions to Ask Before Approving Invoices

Each day, managers review and approve thousands of invoices. Too often that approval becomes a “rubber stamp” with little active thought about what the

Good Questions to Ask Before Approving Invoices

Fraud Issues & Answers for Managers and Key Control Employees

Organization leaders who are serious about managing the risks of wrongdoing, misconduct and fraud are waking up to the fact that most supervisors and employees simply lack the necessary skills. This ‘how to’ program fills in that gap – it shows participants exactly what to do to manage the fraud risks in their areas of responsibility. In this interactive workshop, executives, managers, supervisors and employees will learn the specific steps to take to prevent wrongdoing as part of their daily duties. And when prevention efforts occasionally fail, they’ll find issues faster and handle them more effectively.

approval step really means. “Signatures without thought” increase the likelihood of mistakes and make it easy for those who are trying to fool us.

Managers are encouraged to answer these basic questions before approving invoices and other payment documents.

1. How well do I know this vendor or contractor? Do I have first hand knowledge that they even exist!

2. Do I know that they actually provided the goods or services identified in the invoice or other billing statement?

3. Do I know that they are using the correct amounts for price (including unit prices used), sales tax, freight, and other variables that make up the amount invoiced?

4. On what basis do I know that the prices are reasonable in the first place? What standard have I used in determining that the price charged is fair?

5. How do I know that the quantities make sense? On what basis have we agreed to purchase the stated quantities?

6. How do I know that the invoice and other documents are mathematically correct?

7. Do I know that this invoice has not already been paid?

 

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.”

 

 

Adviser Leadership Management Director Responsibility

Fraud Prevention Tip #35: Write About Your Fraud Risks and Better Practices for Managing These Risks

One of the easiest (and least expensive!) ways to teach your employees about how to manage their fraud risks is to write about it. Short ‘how to’ articles published in organization electronic portals, websites and newsletters are the perfect place to provide direction.

These articles should all address one common theme:

How do I know?

Here are a several questions to go a few levels deeper:

  • How do I know what I’m about to sign is correct?

    Consulting Skills for Professional Auditors

    Consulting Skills for Professional Auditors

    The traditional definition of internal auditing is gone forever. In its place is the expectation that we will supplement our compliance, information verification and control testing responsibilities with value-based ideas for operational and technical improvement. This seminar shows participants how to add measurable value by moving from internal auditor to internal consultant on every audit project. Included will be suggestions on how to blend traditional auditor responsibilities with a more consultative approach. Participants will learn a foundation in the fundamentals and on the job application of Internal Consulting Skills in an auditing environment.

  • What should I be asking myself before approving this document?
  • What details should I check and how can I check them efficiently?
  • How should I react if something doesn’t look or feel right?

Using these and similar questions as your shell or outline, draft and publish one article each calendar quarter for a year or two. That gives readers time to digest the advice and apply it in their daily habits before moving on to the next risk area.

Start by addressing fraud risks that are common or systemic throughout the organization. Examples might include good questions to ask before approving:

  • Invoices from suppliers
  • Out of pocket travel or other cost reimbursement
  • Purchasing card transactions
  • Time sheets
  • Journal entries
  • Work orders
  • Wire transfer requests
  • New customer applications
  • Job candidate documents
  • Monthly or other periodic Applications for Payment from contractors
  • Other documents unique to the organization

Don’t get bogged down in long explanations of theory or governing regulations. Get to the point and provide use full direction. Use this test. If the employee or manager had a one-sided laminated checklist in front of them on their desks as they were reviewing this document, what would be on that checklist?

With their pen in their hand as they are about to approve the transaction, I doubt they would be seeking theory or regulations. They just want to know what to check before signing.

That’s the content of your article right there. No more, no less.

 

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.”

 

 

Fraud Prevention Tip #10: All Employees Must Be Actively Recruited into Anti-Fraud Campaigns

Fraud Prevention Tip #10: All Employees Must Be Actively Recruited into Anti-Fraud Campaigns

First level employees, their supervisors and mid-level managers are your most important line of defense against fraud. All must be actively recruited into your Anti-Fraud Campaign.

Here are three flawed beliefs that often get in the way. All must be addressed openly for your Anti-Fraud Campaign to work.

1. Fraud prevention is common sense.

Leaders who say, “You know, fraud prevention is just common sense” make me very nervous. They don’t understand. They have a blind spot in their thinking that blocks progress and harms your anti-fraud efforts.

The fact is most employees have no meaningful knowledge of fraud prevention and quick detection techniques relevant to their work responsibilities. They

Fraud Prevention Tip #10: All Employees Must Be Actively Recruited into Anti-Fraud Campaigns

John Hall and all Hall Consulting instructors are available to lead your training and seminar events. We work side-by-side with our clients to create, tailor and lead outstanding skills training programs. In addition, Hall Consulting is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of Continuing Professional Education Sponsors – so your training event may qualify for CPE credit as well!

must be taught because it’s not a core skill they bring to the job. How to prevent fraud isn’t something we learned in high school, college or post-graduate training.

There is an assumption that in a professional setting and in any corporate, not-for-profit or education organization that employees already know how to manage fraud risks. It is a dangerously flawed assumption in most cases, and it can be easily fixed with some ‘how-to’ skills training by supervisors and anti-fraud experts.

2. Fraud is too negative to discuss with employees.

I know this belief is flawed because every single time I am engaged to provide anti-fraud skills training, someone will come forward and ask, “Why did the company leaders take so long to tell us this?”

It’s not too negative to discuss. In fact, your team will thank you for giving them the tools to help. By bringing fraud risks out into the open and addressing them in a positive way, it’s not negative at all. Employees want to be part of the solution. All you have to do is ask for their help and show them how. They will respond positively every time.

3. We’ll scare everybody.

You know what? Talking about it openly may scare a few people if what you mean is ‘scare them into action’ by bringing fraud risks to their conscious level and giving them tools to fight. It may make them nervous and put them briefly on the edge of their seat. Not in a negative way. But in a way that gets them emotionally involved in the discussion. Don’t scare them though fear techniques, but don’t back away from a healthy discussion about what can go wrong and how they can help.

Again, they will respond and help – if you ask and show them how.

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.”

 

 

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