Suspicions Archives - John J. Hall, CPA - Speaker, Author and Consultant

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?

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, 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

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.

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

November 16, 2015 | John Hall | anti-fraud • Association of Certified Fraud Examiners • audit committee • Code of Conduct • controls • employee theft • employees • fraud deterence • honest employees • management • misconduct • risk management • Suspicions | Anti-Fraud |

Fraud Prevention Tip #42: Be Ready to Respond

Here’s an exercise that will keep you awake at night. Assume that despite your best efforts at fraud prevention, you get hit anyway. What should you expect when fraud is detected?

Explode False Beliefs

Start by exploding these three myths:

1. We’re ready to address what might come up
2. The authorities will take care of most of it for us
3. The insurance company will give us protection from loss

It would be great if these three statements were true – and sometimes they are. But often they’re not.

• Unless you deal with fraud on a regular schedule, you’ll find that you and your leaders may be very much unprepared to respond.
• The authorities will do their best to assist you in pursuing wrongdoing – if you cooperate fully with them and you are willing to supply the information they need to proceed. They are busy people just like you. They have limited resources and other priorities – again just like you.
• The insurance policy is a contract with requirements you must meet before any losses covered by the policy are paid. Are you in compliance? Have you ever read the insurance contract?

Once you have counterbalanced any existing myths and flawed beliefs, then do these three things:

The Anti-Fraud Toolkit Structure

In 9 modules, more than 6 hours of recorded video lecture, over 250 PowerPoint slides, and many practice ‘To-Do’ action items and practice tools (downloadable in each module), you’ll get the step-by-step, turn-by-turn instructions you need to take action right now. Short on theory and long on action steps, the lectures and tools in each module will enable you to take confident, effective action by building on the successes I’ve witnessed in my clients all of these years.
You’ll also get guidance on what not to do in the fight against fraud – to help you avoid common mistakes, focus your precious limited energy, and avoid undermining your own efforts through inefficiency and uncertainly!

Assemble the Team

There are inherent risks in responding to wrongdoing, misconduct and fraud. Legal, physical, career, reputation, regulatory, human resources and other risks should be managed by professionals with the requisite authority, background, resources, and interest. List the skills and relationships that will be needed when fraud is found. Recruit and prepare your team of experts in advance.

Prepare the Message

Before fraud is found (right now is a good time!) craft the basics of the message you may need to deliver to employees, customers, the press and others. Write out the bullet points of these messages before they’re needed. Be fully prepared to deliver these messages in an organized confident manner at the appropriate time and place, and by the appropriate authorized spokesperson. But get the basics on paper now when things are calm.

Put the Fraud Response Plan in Writing

Make sure that everyone in the organization knows who’s authorized (and who isn’t) to investigate, handle formal and informal information requests, and interact with any outside parties. Put this ‘crisis response plan’ in writing.

Correcting myths, preparing the team and messages and putting it all in writing isn’t everything, but it a foundation that will pay off many times over if you take care of it right now.

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.”

October 22, 2015 | John Hall | action • anti-fraud • Association of Certified Fraud Examiners • business • cfo • controls • corporate fraud • detection • employee theft • leadership • management • misconduct • performance • planning • risk management • Suspicions • truths • vendors suppliers contractors | Anti-Fraud |

Fraud Prevention Tip #40: Record an Anti-Fraud Webinar or Teleconference

Here’s where you get to have some real fun. Prepare and personally lead a 15-minute Webinar or audio conference call addressing one of the anti-fraud ideas on your list. Use any of the ideas in these Fraud Prevention articles as the basis for your script and slides.

Webinars and teleconference calls are an inexpensive, easy, low-risk way to teach. Avoid the theory and the normal long introduction of concepts and agenda. Don’t overthink it. Parachute right in like this:

“Hi, everyone. I’m John from the Corporate staff. Thanks for joining us today.”

Have you ever wondered about what details you should check before approving supplier invoices for payment [time cards, procurement cards, reconciliations, journal entries, standard month-end reports…]? Well, in this program I’ll give you great questions you should ask yourself before you put your good name on that payment. Let’s jump right in.

Question 1… Example 1… (Use the same ‘script’ in Fraud Prevention Tip #36 in this series as a format guide to all topics presented). Question 2… Example 2… (And so forth.)

Thanks for being part of this short Webinar. I hope I answered your questions about invoice approval. And if you want more – including our assistance on how to brainstorm risks in your department – just let us know. You can reach us at [email address] and [phone number].

Always remember, you’re the solution to our fraud risks. Don’t let it happen on your watch!”

You’re off and running. Get ready to be recognized as an expert-hero who is interested in helping everyone else do a better job.

One last point. You may be wondering if this Webinar suggestion steps on any print articles you have published addressing the same topic. Is it redundant? Maybe – but who cares. DO BOTH! Reach as many people as you can. And both ideas are easy and virtually free.

John J. Hall, CPA

October 12, 2015 | John Hall | action • anti-fraud • effective • fraud deterence • habits • honesty • internal fraud • leadership • management • performance • planning • risk management • Suspicions • truths | Anti-Fraud |

Fraud Prevention Tip #39: Avoid Form Over Substance in Managing Risks

I’ve been a professional auditor for almost 40 years. And I’ve seen it over and over and over again – hundreds if not thousands of times. Form over substance controls and behaviors targeting fraud risks.

Here’s what I mean:

• Two signatures are required on transactions over a threshold like $5,000. But neither signer knows what to look for. And each signs simply because the other did.

• Inventory policies require a wall-to-wall count at least once each year. Staff see several years of dust piling up on boxes along the back wall, but don’t bother asking, “What’s really in those boxes – if anything?”

• Managers approve monthly invoices from service providers, but never get out from behind their desk to find out if the service is being provided in accordance with agreements.

• Property housekeeping supervisors work from 9 to 5, and never show up unannounced in the middle of the night to observe when the work is actually being performed.

• Because it’s hot out on the docks, receiving personnel just initial bills of lading from trucking companies instead of counting the number of boxes received. They haven’t opened and inspected the contents of boxes in over a year.

• Managers are surprised when their month-end budget reports show unexplained spending, unknown vendors, and other variances. But they just assume ‘it’s probably OK’ and fail to double-check details.

• Payroll department supervisors see unusual patterns of overtime in two or three employees, but don’t take the time to verify that the reported hours are accurate.

• The assistant controller approves any journal entry placed on his desk for processing. He blindly trusts his staff to make sure that the entries are correct. And everybody in the department takes advantage of it.

• An executive knows one of her managers is extremely cozy with a key supplier and is living well beyond his means. But she shies away from determining if the source of the manager’s ‘income’ is actually a side-deal they have with the supplier.

• The New York based manager who oversees four company locations in Africa has never left the US to inspect these critical overseas operations.

Avoid form over substance. Insist on quality – especially in anti-fraud controls. Hold your people accountable for their signature and results. Refuse to be an easy target for wrongdoing and fraud.

John J. Hall, CPA

October 8, 2015 | John Hall | action • anti-fraud • Association of Certified Fraud Examiners • audit committee • controls • corporate fraud • fraud deterence • fraud prevention • internal fraud • misconduct • risk management • Suspicions • vendors suppliers contractors | Anti-Fraud |