This is taken from the White-Collar Crime Fighter newsletter. You can subscribe to the full newsletter here, as well as access other fraud-fighting resources.
Steve Albrecht on: The Six Signs of Internal Fraud
As executives, managers, internal auditors or rank and file employees, when it comes to internal fraud we may suspect it… suffer the consequences of it…or anticipate it. But we never see it.
However, we can see the signs of fraud. There are six of them in all organizations. By understanding them and looking for them, we significantly improve our chances of detecting and reporting fraud…
- Accounting anomalies—representing such countless red flags as inventory shortages, unrecorded transactions, unusual levels of returns, etc.
- Internal control weaknesses. These equate to opportunities for insiders to commit fraud. If you identify a weakness, chances are that someone will exploit it if they haven’t already.
- Analytical symptoms. When a business function occurs at the wrong time, or is conducted by the wrong person or a similar operational anomaly occurs, chances are it is a sign of fraud.
- Lifestyle symptoms. Employees living beyond their means is the most common. Smart internal fraudsters would steal and save. But most steal and spend. When you notice signs of extravagant lifestyle, you’re most likely looking at a sign of fraud.
- Behavioral symptoms. People who stop looking you in the eye… sweat more than usual… come in earlier than usual and/or stay late should be monitored as potential fraudsters.
- Tips and complaints. When employees report actual or suspected incidents of fraud among their co-workers or bosses, you’ve got good reason to start following up with a search for hard evidence.
White-Collar Crime Fighter source:
Steven Albrecht, PhD, CPA, CFE, Associate Dean, Marriott School of Management, Brigham Young University, and the first President of the Association of Certified Fraud Examiners. He is one of the foremost thought leaders in fraud detection, prevention, deterrence and investigation. He can be reached at [email protected]