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.”

 

 

Fraud Prevention Tip #49: How to Deal with Employee Theft

Fraud Prevention Tip #49: How to Deal with Employee Theft

Anti-fraud efforts usually lean towards managing external threats. But your largest exposure is from employees simply because they are already inside your circle of trust.

When we find out that a trusted employee has been stealing from the organization, it can be really difficult to know how to proceed. The theft in question could be anything from taking inventory or supplies for personal use or for resale, adding fictitious costs to travel and other out of pocket reimbursement requests, putting false information on time sheets, engaging in intellectual property theft, or profiting from shadow deals with suppliers, customers or contractors.

Fraud Prevention Tip #49: How to Deal with Employee Theft

THE ANTI-FRAUD TOOLKIT
Let’s be honest. The simple fact that you are considering The Anti-Fraud Toolkit says a lot. It tells me that you are a special person. A true leader in the anti-fraud effort – regardless of your position in the organization chart, your length of service in the business environment, or what your technical specialty areas might be. You are unique in your intention to attack fraud risks – and to do something about it.

Simply put, there’s no one size fits all solution to addressing theft and other fraud by employees. But you have to act. You simply can’t allow the disease of deception to take root in your business.

Here are three suggestions to get you pointed in the right direction.

• Get Help. It’s a rare business leader who has sufficient background in fraud issues to handle cases of employee theft by themselves. Get the help you need to protect all involved, including honest employees. Start with the legal, accounting, human resources and technology experts who are already part of your core business support team. Get advise from qualified professionals – ideally before you’re faced with a fraud event. Outline a comprehensive response plan now before it’s needed. Then execute it objectively should an event be detected.

• Don’t Delay. It’s time to park your disbelief and anger, and get started on taking care of the problem. Employees who steal have no place in your organization. It’s time to stand behind your policies of zero tolerance for cheaters. You’ll need to proceed efficiently and professionally towards a solution that balances the facts of the case with the desire to get it all behind you. But be careful not to let uncertainty and indecision get in the way of what needs to be done. Get help, then take action.

• Learn from What Happened. OK, you got taken by a trusted staff member or manager. It happens, so it’s important to get past the issue at hand and move forward having learned important lessons. Think about how controls could be tweaked without getting in the way of efficient business practices. Analyze how you could be a better overseer of transactions and activity without holding up progress. Recruit your honest employees into a stepped up campaign to make sure it never happens to you again.

When trusted employees steal from the organization, it violates everything you and the many other honest team members hold dear. Out of respect for the honest majority, get help, take action, and adjust daily practices based on lessons learned.

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.”

 

 

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.”

 

 

Managing 3rd Party Risks

Fraud Prevention Tip #33: Special Attention to Managing 3rd Party Risks

One fraud risk area of special concern comes from relationships with third parties. Here’s why.

Your organization’s relationship with employees is governed by law, policy, and operating procedures. There exists a daily ability to supervise, monitor, reward, and discipline individuals. Information needed for these tasks is available with few barriers. Employees generally share the organization’s ethical standards. Deviation in individual behavior from those standards is often detectable.

The organization’s relationship with third parties is determined by the documents governing the relationship. Examples include contracts, purchase orders,

Managing 3rd Party Risks

High Impact Auditing: Practices that Pay

Every day, the expectations placed on professional internal auditors are on the rise. As a result, we all find ourselves in a constant state of “catching up” in order to meet the needs of management, board members, clients and even ourselves. This highly interactive program will provide proven ideas that can dramatically increase the daily effectiveness and perceived value of the individual auditor and the audit team. Participants will learn how to:
Identify the key areas where management and other client groups want and need attention
Define your role to fully meet the needs of the organization
Identify the behavioral adjustments needed to be more effective every day
Improve audit planning and performance to identify and address areas of importance
Develop audit steps that find important problems and opportunities
Get desired action from auditees and others
Demonstrate measurable value

engagement letters, loans, leases, sales agreements, standard terms and conditions, and other documents. Third parties have legitimate business interests that may at times be at odds with those of their customers and clients. If wrongdoing by third parties is suspected, it may be difficult or impossible to obtain records needed to prove or disprove the suspicion.

Suspected fraud by outside organizations with a trust relationship can be extremely challenging to pursue. Be as prepared as possible for these challenges. Make sure that the documents that define the relationship are clear on matters of fraud and other wrongdoing.

Where appropriate, make your organization’s Code of Conduct an integral part of any third-party relationship documents. Consider having the third party acknowledge their awareness and compliance with your conduct standards every year.

Also include appropriate Right to Audit language in third party ‘deal documents’ – again, where appropriate to do so. We recommend strong Right to Audit language in:

• Requests for Proposals
• Contracts (including the requirement for your Right to Audit be included in any sub-contacts or suppliers to the contract)
• Purchase Orders
• Engagement Letters with your professional service providers
• Any leases you sign as lessor where there is a cost pass through provision
• Standard Terms and Conditions

One last thing. Don’t just have Right to Audit provisions. Perform detailed audits of third parties performed by subject matter experts. If you’re not quite sure where to start, reach back to me at John@JohnHallSpeaker.com. We’ll get you pointed in the right direction.

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.”

 

 

scam fraud prevention

Fraud Prevention Tip #31: How to Support Employee Anti-Fraud Behaviors

Cheryl asked me for ideas on what she could do as a manager to support her staff’s anti-fraud behaviors. Here’s the quick list we developed. Think about how these suggestions might apply in your own work.

Pride

First and foremost, supervisors and employees must have a true sense of pride in their work. They must feel that what they do each day is important, that it adds

pride

“Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life. Because almost everything – all external expectations, all pride, all fear of embarrassment or failure – these things just fall away in the face of death, leaving only what is truly important.” ~ Steve Jobs

value to the organization and to those the organization serves. Pride in doing things well, to the best of an individual’s ability is the foundation of any business risk model, including effectively managing fraud risks. Every day, supervisors at all levels must reinforce the importance of the work and each employee’s role. Instilling and supporting a sense of pride in work quality is critical in managing fraud exposures.

Skills

Second, make sure all staff know how to do their job through meaningful skills training and one-on-one coaching. Not mentoring – skills coaching. Few employees, managers or executives come to the organization with deep knowledge of fraud prevention. And most organizations do a horrible job of filling the gap. How can your staff prevent and promptly detect wrongdoing if they don’t know how to do it? Managers must teach their staff exactly what wrongdoing and fraud looks like in the transactions and activities they see every day. It’s so simple. Everyone must know what can go wrong and how to respond. And it’s every manager’s job to make sure that happens.

Attitude

Third, encourage every employee to think like an owner when reviewing and approving transactions. If each employee thought, “What if this was my money we’re spending here?” they would be much more likely to react to the strange, odd and curious in what they see – before putting their good name on the document.

Openly encourage an attitude of “Fraud? Not on my watch!” Attitude is important. When managers are able to blend pride, skills and attitude, fraud gets pushed out the door. Those intent on committing wrongdoing will look at an employee group that is motivated to fight this problem and realize, “These folks aren’t messing around. If I try it here, I’ll get caught right away.”

I’ve always believed we should hire for attitude and train for skills. What is the attitude of your team when it comes to fighting fraud? Are they motivated, proud and skilled? If not, get them there fast. Or you’ll be an easy target for those looking to commit wrongdoing and fraud. Let us know if we can help.

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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