Your No. 1 tool for uncovering attempted fraud
August 6, 2008 by Carol KatarskyPosted in: Best practices, Communication, Fraud prevention, Internal controls, Special report, Uncategorized
Tough internal controls play a part, but the most effective tool for preventing fraud is one many companies ignore. More than half (52%) of occupational fraud was first detected thanks to an internal tip — specifically, one called into a dedicated hotline. For fraud being perpetrated by a manager or upper-level exec, it was 63%
That’s according to the 2008 Report to the Nation on Occupational Fraud & Abuse by the Association of Certified Fraud Examiners (ACFE).
It makes sense: No matter how good your internal controls, a would-be crook who’s in-house will have an advantage in trying to work around them. Fortunately, more-honest staffers are also more likely to catch on to any fraudulent activity.
But, when employees suspect a co-worker of theft, they’re much more likely to come forward if they can share what they know privately.
Not every company has the resources for a dedicated tip line. But you can get similar benefits. Try to maintain an open-door policy — and a reputation for keeping things to yourself. If employees trust that they can share info with you — and that anything they say won’t hit the gossip circuit the next day, they’re more likely to come to you if they suspect a problem.
September 11th, 2008 at 9:55 am
How would you handle this one. The owner of the company I work for is well aware that Our CFO is putting thru auto expenses - and personal use expenses - and has done nothing about it.
Should I be deligent and report this to the IRS ?????
September 11th, 2008 at 9:59 am
That’s a sticky one… if you report it, it could lead to a much larger audit of the company.
Might be worth talking to the owner to make sure he fully understands the ramifications of allowing this kind of thing. I’ve seen many execs who don’t really “get” why these rules are in place. They think they’re being generous by allowing a valued employee a “perk” without realizing that to IRS’ eyes, it looks more like fraud or tax avoidance.