The 90 Percent: 4 Things to Do If You Suspect Fraud at Your Company

September 2017 | Article

Fraud prevention. Those sweet words are music to any forensic accountant’s ears. Not only do we preach the importance of having internal control examinations, but we actually take quite a bit of pride knowing our clients risk for fraud can be significantly decreased as a result of our advice.

Now let’s talk about the other 90 percent of our clients—90 percent of our time as forensic accountants is spent assisting clients who suffered a loss from employee theft. And the majority of those clients have never had any type of fraud risk assessment performed. That’s right. As much as we prefer to help businesses prevent a disaster, the truth is, we make 90 percent of our revenue helping detect, examine, investigate, and litigate these matters. As a result, I think it’s wise to discuss what’s on the minds of the 90 percent. Instead of discussing the “how”, let’s talk about the “what now?”

Initial Steps
Dealing with fraud is a unique situation for most businesses and individuals. Each instance is different, and not everyone prefers to handle it the same. However, the three main goals remain consistent:

  1. Identify theft amounts
  2. Recoup assets
  3. Avoid liability

Here are a few things to keep in mind to reach these goals.

  1. Act Timely Once a fraud is detected, the clock begins to run. The statute of limitations for fraud can vary by location, but most states agree that the time period begins when the fraud is, or should have been, detected. This also applies to insurance claims. If you plan on filing an employee dishonesty claim with your insurance provider, put them on notice immediately so you can take the proper steps to a successful claim.
  2. Gather Information Gather as much supporting proof as possible. Do not jump to conclusions based on a red flag and a hunch. Utilize third-party documentation, such as bank records and vendor invoices. The evidence you gather should not be produced or made known to the person of interest. This will only provide them with time—time to obtain an attorney, create excuses, or even blame others.
  3. Utilize Consultants Utilizing consultants to get a third-party perspective is extremely helpful in making decisions for your organization. These include attorneys, forensic accountants and computer forensic specialists. They can walk you through the process and help keep business interruption to a minimum.
  4. Do Not Make Accusations Premature accusations or discipline can lead to unwanted or unnecessary liability. This can include wrongful termination, slander, defamation, or libel claims. Paid administrative leave can be an option until the situation is corrected. Use caution because it can inadvertently tip the fraudster that they are being investigated, giving them a chance to obtain an attorney, which can make obtaining future information from them very difficult.

Dealing with fraud is never easy and almost always unexpected. Utilizing the tips above can assist your organization to identify theft amounts, recoup assets and avoid liability. Of course, having a consultant examine your internal controls can help mitigate this problem from ever occurring—as long as you’re willing to be part of the 10 percent.

If you suspect fraud at your organization, don’t delay. Follow these steps and call a forensic accountant now.

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