What can I do about potential fraud if I think something is wrong?

What can I do about potential fraud if I think something is wrong?

Whether it comes as a concern or a tip, most practitioners do not know what to do when confronted with a potential fraud or loss issue.

It’s important not to jump to conclusions, because mishandling employee behavior can cause even more problems. At the time you are presented with an issue, you usually do not know if it’s a mistake, intentional negligence or actual fraudulent activity.

In our years of investigating these matters, we have identified a few “Do’s and Dont’s” that can help you proceed cautiously in these circumstances.

What to do:

  • Do conduct background searches prior to and as a condition of employment and/or business partnership arrangements. Use your judgment to identify whether relevant issues arise, but recognize that your livelihood is at stake with each hire, and you must stay informed.
  • Do seek help if issues arise: demand experienced and independent professionals, CPAs, CFEs and attorneys.
  • Do understand the business processes and tools available for your use to maintain control of your practice. Ultimately, you are the named owner of each of these, and can be held liable if they violate legal policies.
  • Do implement a code of conduct policy that includes a zero tolerance clause on fraud, and defines the appropriate punishment.
  • Do be prepared to respond appropriately to any allegation. If you are caught by surprise, simply commit to investigate further and follow up appropriately.

What not to do:

  • Do not react prematurely or confront your staff before you gather the documented facts.
  • Do not ignore issues, concerns or tips in favor of misplaced trust; pay attention to the red flags.
  • Do not hesitate to establish additional controls at any time, but make sure you can document erroneous or fraudulent behavior accurately before changing processes.
  • Do not think it cannot happen to your practice.

Look for our next posting to help you protect your hard-earned practice and assets.