News

Chapter Member News and Reviews

Aug. 7, 2020

EXTRA EXTRA....READ ALL ABOUT OUR CHAPTER MEMBERS!

Welcome to our Chapter member news and reviews page!

On this page, we feature any Chapter members who have recently joined our Chapter, obtained their CFE credential, acquired a new job position or promotion, won an award, or published their work. We want to celebrate our members' accomplishments!

If you have news about a Chapter member or even news about yourself (don't be shy!), then please email us at: [email protected]

Please also check out below for our more focused member spotlight page!

June 2019 Headlines

The winner of our monthly GACFE Raffle this month was GACFE member Theodore Rucker, III (Ted). Ted has won a FREE GACFE luncheon voucher. Congratulations Ted!!

April 2019 Headlines

Breaking News - April 9, 2019: Pat Salem and Tammy Thomas, IAG Forensics & Valuation

Please join us in celebrating the promotions of Pat Salem and Tammy Thomas to Principals in the business litigation division of IAG Forensics & Valuation!

Pat Salem, CPA, CFE, MPA joined IAG in 2010 after a twenty-plus year career in software development. Her practice focuses on fraud investigations, trust & estate litigation, government and school investigations and matters involving complex data analytics. Her software and big-data background have proven invaluable to our clients.

 

 


Tammy Thomas, CPA/CFF, CFE, CGMA joined IAG in 2014. She has over 20 years of public and private experience as an auditor at Arthur Andersen, a management accountant at a real estate development firm and forensic accountant in litigation services at another professional services firm. She focuses her practice on complex commercial damages, such as lost profits, professional malpractice matters, trust and estate litgation, and matters requiring funds tracing. her public and private accounting background has served her clients well as she has been an expert witness at depositions and trials for over 15 years.
  

 

Congrats, Pat and Tammy!

Breaking News - April 1, 2019: Scott Hilsen, Cox Automotive

Please join us in congratulating Cox Automotive’s Assistant General Counsel/Chief Compliance & Privacy Officer, Scott Hilsen!

Congrats, Scott!


Member Spotlight / GACFE Financial Crimes Times - October 2019 Issue #5

Aug. 7, 2020

Meet GACFE Member...

Rusty Lane, CPA, CFE, CGMA

Director in Moore Colson’s Consulting Practice

In our fifth issue of the GACFE Financial Crimes Times, our spotlight shines upon Rusty Lane, Director in Moore Colson's Consulting Practice and Special Services Group, where he helps clients with unique accounting issues including forensic or litigation assistance.

Rusty has over 25 years experience in accounting, business operations, tax compliance, and litigation support in the public accounting and private sectors. He also has Big Four experience providing financial advisory services, forensic accounting, fraud investigations, and activity-based costing models to Fortune 500 clients and government agencies.

Rusty conducts financial statement fraud investigations and provides expert witness reports and testimony in litigation cases involving disputes between shareholders, financial institutions and stockholders. He also serves as an accountant and operations manager for various businesses under receivership, manages daily operations, including vendor relations, inventory control, forecasting, and cash flow. Rusty also develops forecasts, budgets, cash flows and business plans for clients, creditors, and other stakeholders, while designing internal controls procedures for operations and accounting units to safeguard assets and assist in the management of the company.

Beyond Fraud: How experienced forensic accountants can help your bottom line

By Rusty Lane, CPA, CFE, CGMA - October 2019

The controller of a manufacturing plant noticed that his financial statements showed the company was doing well and making money, but his bank statement said they were broke. The controller asked me: “How can we have this paradox? If our company has strong sales, and collections are not an issue, why don’t we have any cash?” Based on my experience as a forensic accountant and former controller, I knew there was no simple answer to his question.

On the surface, one might immediately assume that someone within the company was stealing cash, but before accusing someone of stealing, a financial investigation needed to be conducted. In the above situation, my investigation revealed three main issues:

Issue #1: The processes for recording the material used by manufacturing were based on estimated consumption rates and never compared to actual consumption rates. Therefore, the company did not know the true material cost to build its products, resulting in its gross margins being inflated.

Issue #2: A lack of communication between operations, sales and accounting meant that no one in sales knew that the inventory prices provided by the company’s system to estimate new product costs were incorrect because the inventory had already been used. Thus the system provided inaccurate information, and the company had to purchase more materials at higher current market prices.

Issue #3: The company’s policy was to give quantity discounts, but they did not consider the effects of the discounts combined with the inventory pricing issues when setting the selling price. Thus larger orders were being sold a price that did not generate enough profit to cover overhead.

It does not take long for these types of issues to start affecting the health of a company and, based on the speed of financial reporting, by the time it is discovered, the company may be in serious financial trouble. Often, companies are unsure of where to turn when this happens.

What is a Forensic Accountant?

A forensic accountant is someone who has typically been trained as an accountant but has focused their career on developing a mindset to find out why and how problems have arisen. This dedication and experience are paramount. In addition, most forensic accountants have attained either the Certified Fraud Examiner (CFE) or Certified in Financial Forensics (CFF) certification. This shows not only their dedication to their craft but also that they have additional experience and training in investigating problems.

Although forensic accountants are often associated with issues related to financial fraud, in reality, the same investigative skills can be used to solve other problems. Forensic accountants go beyond just looking at financial data; they look at areas of operations and interview personnel to find the underlying issues of the problem at hand.

How can a forensic accountant help my business?

  • Forensic accountants are good at digging in deep and finding the root causes related to operational or financial problems.

  • If a project or product is not making the profit margins you originally expected, a forensic accountant can help find the cost associated with the project or product and assist you in determining which course of action to take to correct the issues.

  • If you think your business is spending too much money in a particular area, a forensic accountant can investigate and assist in determining if the expenses are appropriate.

  • If operations are not going as smoothly as expected, a forensic accountant can use his or her skills to interview people, examine documents, and get to the root causes of the issues.

To bring this to life, let’s go back to our manufacturing plant. This investigation included:

  • Interviewing operations personnel to find out if there were inventory shortages, how much material was scrapped during the manufacturing process, and how they reported the material used on each project.

  • Interviewing the accounting personnel to find out how operations reported material usage.

  • Interviewing the sales personnel to gain an understanding of how items were priced.

  • Analyzing the accounting data to see if it flowed in the same manner as was outlined in the interviews.

  • Looking for anomalies in the accounting data that indicated additional issues that needed further investigation. The analysis often gets very granular as problems are often hidden from a standard accounting analysis.

  • Evaluating other possible reasons for the problems and testing the likelihood of these being the source of the issues.

The result?

After conducting all the interviews and following the flow of documents and information, we uncovered that design modifications had been made along the way to compensate for temporary shortages. Because the issue was identified, we were able to remedy it by reducing the number of different design variations by 25%. This allowed for the cost to come down and set-up times to shorten, reducing overall labor spent making the products. Consequently, the company’s profitability improved dramatically.

The Bottom Line

Forensic accountants track problems to their source and provide companies with critical information as to what happened, and why and how to fix it. It does not matter if the problem involves a potential fraud or trying to figure out why you’re not making more money. The next time you hit a wall and need help with a problem, consider hiring an experienced forensic accountant.


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Member Spotlight / GACFE Financial Crimes Times - July 2019 Issue #4

Aug. 7, 2020

Meet GACFE Member...

Zane Kinney
CFE, PI
Principal of Astinel Security and Forensics Risk and Investigative Services

In our fourth issue of the GACFE Financial Crimes Times, our spotlight shines upon Zane Kinney, CFE and licensed Private Investigator. Zane is a former GACFE Board member and GACFE membership Chair.

Zane has spent his entire adult life in the protection field. His background exceeds 30 years in Law Enforcement, Loss Prevention, Corporate Investigations, Physical Security, Private Investigations & Forensics. He is a Certified Fraud Examiner (CFE), Licensed Private Investigator in the State of Georgia, and the Principle Consultant for Astinel Security & Forensics. Zane frequently speaks on Fraud Prevention.

 

Determining Deception Through the Written Word

The World of Forensic Statement Analysis (FSA) and How It Serves as an Investigative Tool in Determining the Truth

By Zane Kinney, CFE, PI - July 2019

Forensic statement analysis is not handwriting analysis but an examination of the written word provided by accusers, defendants, victims, or witnesses, to describe an event. Dissection of a written statement to examine the parts of speech, context, order, and possible underlying meaning can reveal when someone is truthful, deceptive, or omitting information. At minimum, it can help an investigator frame the traditional interview.

Would you want to know if...

  • a situation of workplace harassment occurred?

  • the domestic abuse is real?

  • an injury claim is valid?

  • a sexual assault charge is truthful?

  • a robbery really happened?

  • the victim or defendant is telling the truth – the whole truth?

Who can benefit from FSA as an Investigative Tool ...

Attorneys | HR Representatives | Corporate Counsel | Insurance Adjustors
| Private Investigators

Type of Situations FSA Can Be Employed In...

Criminal Defense | Prosecutions | Personal Injury | Employment Law
| Insurance Defense | Family Law | Civil Litigation | School & College Law

Human Resource Professionals | Insurance Providers | Audit Professionals

Skilled attorneys, investigators, insurance adjusters, and human resource professionals pour over written statements but information is often missed. The truth of the matter may be found in a single word or phrase within documentation you currently have on hand. Sometimes reality is one sided or somewhere in the middle. It has been noted, “actions speak louder than words” – in reality words ARE actions, or the lack thereof.

The science of examining the written statement has existed for many years; however, it’s still an undervalued and underused tool that can add clarity to both civil and criminal investigations.

Linguistic Statement Analysis – Another Definition

The written statement from a party in a criminal or civil matter which outlines an event will provide linguistic clues. The clues come from the writer’s personal account of what happened and can often reveal rich information which should be explored further, or information which may be truthful or deceptive. While the process of linguistic statement analysis is not perfect, it brings with it a high degree of unbiased accuracy. There is no traditional interviewing involved but only the writer’s discourse. There are a few considerations which have to be taken into account; however, it can be applicable in most any situation.

Accusations | Credibility

If you’re an attorney, perhaps you’ve had cases where a client or victim withheld information or failed to mention something which casts doubt on their story. Unfortunately, it may have occurred during a trial or deposition. It may have been an omission which was inconsequential (or very critical), but magnified by the opposing side. Again, you’re skilled at your profession, but a linguistic analysis can be a tool to better assist you. Would you want to know about potential issues before hand?

  • In a motor vehicle accident, a plaintiff was less than candid about her reason for being in a particular area. Although it had nothing to with the accident, it was used to impugn her testimony.

  • Two employees claimed they were robbed while transporting a bank deposit. The supposed robbery was a hoax, detected by their written statements.

  • The fiancé of a missing woman was suggested to be involved in her disappearance, but his linguistic statement was consistent with the truth. The woman appeared a few days later.

  • A sports figure was accused of sexual assault. The analysis of the accuser’s statement revealed no indications of an assault. Ultimately, no charges were filed.

  • In a case of insurance fraud, one word in the claimant’s written statement revealed an act of premeditated arson.

Forensic Statement Analysis | Serving Justice

Currently in our society, accusations abound, particularly in the area of sexual harassment or assault. What if a criminal accusation resulted in a false prosecution OR there was a failure to prosecute for a crime? What if a workplace harasser went unpunished OR someone falsely accused was terminated?

It should be noted that primarily a portion of a statement may be true, but the writer may wish to lead us to a conclusion which isn’t factual. If you’ve read our previous information, you’ll understand we’re not interested in helping anyone escape justice or avoid consequences. The goal is and should always be to explore and gather facts. Our experience can cause unconscious bias for or against a case. Before making an assumption, consider this analysis. It can often show us where to inquire further and ultimately better serve the cause of justice.

Want To Know More About FSA and How It Can Benefit Your Organization?

If you answered yes, then contact Zane Kinney to serve as a speaker at your next corporate or association event. You can contact Zane via email at: [email protected] or visit his company website at: https://astinel.com/

 

 


Member Spotlight / GACFE Financial Crimes Times - April. 2019 Issue #3

Aug. 7, 2020

Meet GACFE Member...

Director of Ethics and Compliance at Cox Communications

In our third issue of the GACFE Financial Crimes Times, our spotlight shines this quarter upon Elizabeth Simon. Elizabeth Simon is the Director of Ethics & Compliance at Cox Communications. She is responsible for the day-to-day activities of the Corporate Compliance program. She administers the case management system for investigations of reports into the ethics hotline, ensures the compliance intranet site is maintained, maintains the Code of Conduct, serves as the Records Coordinator for the company and leads other compliance projects.

Prior to working at Cox, Elizabeth was in both the Internal Audit and Global Security departments at Kimberly-Clark. She managed K-C’s anti-fraud program and internal audit’s data analytics. Prior to K-C, she also worked at Ernst & Young and Pricewaterhouse Coopers in forensic accounting and audit positions. Elizabeth has a Masters' degree in Accountancy from East Carolina University, is a Certified Public Accountant and a Certified Fraud Examiner.

Elizabeth was elected to the Board of Regents for the Association of Certified Fraud Examiners in January of 2018 and has served in that capacity ever since. She has been a member of the Georgia Chapter of the ACFE for a year. She is also the Chair of the Board for the Atlanta Compliance & Ethics Roundtable. Outside of work, she is an avid marathon runner and has just completed her goal of running a marathon in all 50 states. She also enjoys spending time with her husband and four children.

A viewpoint of Ethics Regarding our Connected Generation

Are Ethics Lost on the Connected Generation?
By Elizabeth Simon April 2019

The youth of today will be the leaders of tomorrow, so the importance of instilling ethics in today's youth is astronomical. As a Director of Ethics, my job is to instill our company values in every employee and help them to make the ethical decisions that our company expects of them. But I don't often work with the younger generation - the connected generation (born after 2005) - where my children fall. Unfortunately, I got to experience, first-hand, the ethics of the connected generation in my own backyard.

My girls, ages 12 and 9, wanted to watch a scary movie. I looked up the reviews and parental guide and determined that it was not appropriate for children under the age of 10. That meant that my 12-year-old was allowed to watch it, but my 9-year-old was not. The two of them got together and decided to make a deal with me - they would rake the entire backyard if I let them watch the movie. I relented and made the deal, under the condition that they finish the leaves in two days, or neither of them would have any TV for the entire month of January. They agreed.

That night, they watch the movie. My 9-year-old survived, although she was a little scared. But all was well.

The next day, I sent them outside to start raking and bagging leaves. After coming back inside and complaining about 100 times about how hard it was to rake leaves, my 12-year-old convinced my 9-year-old to cut a few corners. "Mom will never know, and we'll get it done faster." She raked the leaves under the deck, behind the shed, and beside the house to hide them from my view at the window. She "filled" bags by fluffing up the leaves so the bags looked full, when in reality, they were less than half full. I was, after all, only looking from the window and not coming out to look in person...yet. After the second day, I went out to inspect the leaves. They still weren't done, but you could see most of the grass. Then I looked around and found the leaves under the deck and piled up beside the house and behind the shed. I also pushed the leaves down in all the "full" bags. I was not happy with the end result of their leaf raking.

The next day, I divided the yard in two parts. My 9-year-old would finish the perimeter of the yard near the fence and from the tree to the back of the yard, and my 12-year-old would do from the tree to the house. The tree is only about 5 yards from the house, and the portion of the year from the tree to the back is much farther. So, in reality, my 9-year-old had more of the yard to complete than my 12-year-old. But my 12-year-old immediately started complaining that my division of the yard was not fair. I was quick to remind her that her sister actually had more space to cover, but she said that there were more leaves in her section. I then pointed out to her that if she hadn't raked the leaves under the deck and beside the house to begin with, she would have had less leaves to rake.

Once the leaves were finally done, I took my 12-year-old daughter out to dinner to talk about the job. I asked her if she knew why Wendy's burgers were square instead of round like everyone else's burgers. She didn't know. I then began my discussion on ethics. Wendy's burgers are square because founder Dave Thomas doesn't like "cutting corners." The square burgers are the perfect example and reminder to his employees of what the values of the company are. Every day when they are making burgers then have a pictorial of what the company believes and how they are expected to act as an employee of Wendy's.

Cutting corners may get you a win in the short term, but it never wins in the long-term. If we had left the leaves under the deck, we could have had snakes in our yard and bugs in our house come summertime. In this case, raking the leaves under the deck and hiding them behind the house only made her have to go back out and rake the leaves again for a third day and lose TV for the month of January. I then explained to her what ethics was - doing the right thing, even when no one is looking. If she had done the right thing and raked the leaves correctly instead of hiding them, she would have been done in two days and still had TV privileges. But it shouldn't matter if I was looking or not. Because even if I'm not looking, she should have chosen to do the right thing and be a good role model for her younger sister.

Ethics is a choice. "Enter through the narrow gate, for wide is the gate and broad is the road that leads to destruction, and many enter through it. But small is the gate and narrow the road that leads to life, and only a few find it." (Matthew 7:13-14). More than ever, parents need to instill ethics in their children and reinforce it over and over. It is their ethics that will lead us in 2030 and beyond.

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GACFE members win FREE Passes to Cyber Security Summit

Aug. 7, 2020

GACFE Members WIN!

20 Members WIN FREE Passes.

At our February 2019 networking luncheon, 20 attending members became winning recipients to FREE passes we were raffling off for the upcoming Cyber Security Summit in Atlanta. We recently formed a partnership with Cyber Security Summit USA that requested us to sponsor the event and which then afforded us this opportunity. CONGRATS GACFE MEMBERS!

 

 


Feb. 2019 GACFE Donates 1K to Scholarship Fund

Aug. 7, 2020

Our 1K Donation to memorial Fund

In support of Tomorrow's Fraud Fighters

In February of 2019, our chapter was happy to be able to donate to the Ritchie-Jennings Memorial Scholarship Program. The program was named after two members of the ACFE, Larry Jennings, CFE, CPA, 49; and Tracy Ritchie, CFE, CPA, 41; both of Houston, Texas. They were among five people fatally wounded when terrorists in Karachi, Pakistan fired upon their vehicle on Nov. 14, 1997. All five were employees of Houston-based Union Texas Petroleum Holdings Inc. Mr. Ritchie served as senior audit supervisor and Mr. Jennings served as audit manager for the company. They were en route to Union Texas' Karachi office.

Surviving spouses Jacqueline Ritchie and Deborah Jennings are proud that their husbands' names are associated with the program, which was established in 1992. "I can't think of a more appropriate way to honor Larry and Tracy," said Mrs. Jennings. "I'm very pleased that the program is named in their honor," said Mrs. Ritchie. "It's very fitting. My husband enjoyed being part of the Association. This is a wonderful cause," she said.

Mrs. Ritchie and Mrs. Jennings have raised funds for the program and ACFE members help underwrite the scholarship fund with their donations. "Both men exemplified the true spirit of our organization with their devotion to detecting, investigating and deterring fraud and white-collar crime," said Dr. Joseph T. Wells, CFE, CPA, Chairman and founder of the ACFE.

Support a future Fraud Fighter today by donating: click here.


Jan. 2019 - Our Partnership with Cyber Security Summit USA

Aug. 7, 2020

Cyber Partnership

GACFE is Partnering with Cyber Security Summit USA

GACFE is proudly partnering with the Atlanta Cyber Security Summit for a one day Cyber Security Summit being held on Feb. 13th at the Grand Hyatt in Buckhead. We are happy to announce that we have secured discounted admission for GACFE members. So please make sure to join us at our luncheon on February 8th for more details on this one-day cyber educational conference, where you can earn up to 6 CPEs. PLUS, we will be holding a raffle for tickets as well.

 


2019 Annual GACFE/ACAMS Social & Networking Event

Aug. 7, 2020

Annual Social & Networking with ACAMS

Network, socialize, network, and socialize.

For the second year in a row, we had our social/networking event with the Georgia Association of Certified Anti-Money Launderers (ACAMS) at Joey D's in Atlanta. We had a wonderful turnout and a great time. Thank you ACAMS and a great thank you to all our GACFE members. Come and check out some of our pictures.

 


January 2019 GACFE Board of Directors Dinner Retreat

Aug. 7, 2020

2019 Annual GACFE Board Retreat

A New Year and a New Beginning with 2019 Goals and Objectives

Every year the GACFE Board meets for it's annual retreat dinner in downtown Atlanta. This is an important event where we set our goals and objectives for the new year and exchange new ideas. Our mission is to provide our members an environment of education, training, and networking for all fraud fighters in the indusry. Although we have some new events planned in the pipeline this year, it is important that we hear from you about anything new or different you would like to see, questions, comments, etc. That said, please do not hesitate to contact us. Visit our contact page and reach out to any one of us. We thank you for your active participation in the GACFE and for your support!


Member Spotlight / GACFE Financial Crimes Times - Oct. 2018 Issue #1

Aug. 7, 2020

Meet GACFE Member...

Vicky Bosma, CFE

Licensed Private Detective, CFE, former GACFE board Director and Principal of Bosma Investigative Services

In our First issue of the GACFE Financial Crimes Times, our first Chapter member that we would like to feature and honor is Vicky Bosma. Vicky is the first woman to qualify for a Private Detective business in Georgia, and the first woman appointed to the Board to represent the Private Detective industry. Her job was to review all applications that were submitted to the Board, for both Private Detective and Security Agencies. She also had to review all the investigations being conducted for the Board. For four times Vicky was appointed by three different Governors to serve on the Georgia Board of Private Detectives and Security Agencies. Vicky also served as Chairwoman of the Atlanta Chapter of the American Society of Industrial Security in 1990.

Vicky earned her CFE in 1996. She was one of the first members on the GACFE board. She was also one of the first seven members of the chapter when she and the others thought the chapter would disband.

As an interesting side note, Vicky was also featured on the former cable TV show we all remember called Unsolved Mysteries. Here's the link to the case Vicky investigated that was featured.

The Importance of Making Interpersonal Connections in a Digital World

With all the technology at our fingertips, sometimes we forget the personal touch is needed to investigate questionable or fraudulent claims. I was hired to investigate a Premise Liability case, in which the Plaintiff was seeking seven (7) to (10) million dollars. The victim, who was not a resident, had been shot during an altercation involving drugs and money, on a multifamily housing property. The victim was hospitalized for several months and had life altering injuries. The victim eventually died several years later, from an unrelated illness. The family of the victim, blamed the owner of the multifamily housing property, for not providing “adequate security”. One witness, a resident of the multifamily housing property, knew the victim, but was afraid to talk. The neighborhood was located in a high crime area, known for drug and gang activity. I located and contacted the witness and asked if I could meet with her. When I arrived at her residence, I was greeted by her and invited to come inside. After establishing a commonality between us, she began to tell me her version of the events. She described the day of the shooting and what she observed. She was able to describe the victim, his habits, physical condition, and why he died several years later. According to the witness, the victim continued to use drugs, alcohol and smoke. He was seen out on the street daily, after he was released from the hospital.

With such a large claim, it is crucial to stay in touch with the witnesses. I contacted the witness a few weeks later and she stated the victim’s mother had contacted her, talking about all the money she was going to get out of this case. The witness stated the mother of the victim asked her to “lie” about her son. Adding, she would give her a “large sum of money”. The witness let the victim’s mother believe she would follow through for her. But, the witness wanted no part of lying. I stayed in touch with her, including the day of the deposition. The witness told me she knew she was doing the right thing. The witness testified and told the truth. The multifamily property owner won the case and did not pay anything.


“Trust But Verify: Does Operating Under this Ideology Increase Risk for Management?”

Aug. 7, 2020

“Trust But Verify: Does Operating Under this Ideology Increase Risk for Management?”

By: Terry Thompson
Internal Audit (Chief Audit Executive), Enterprise Risk Management, and Fraud Leader

Terry has been an innovative thought leader and certified internal auditor with over 30 years of Internal Audit and Compliance experience.

In the article “Small business fraud and the trusted employee” written by G. Stevenson Smith in the January/February 2013 edition of Fraud magazine, Mr. Smith states that approximately 87 percent of occupational fraudsters studied in the AFCE’s 2012 Report to Nations had never been charged or convicted of a fraud-related offense and 84 percent had never been punished or terminated by an employer for fraud-related conduct. Specific to small businesses, Mr. Smith indicates that the major reason fraudsters can commit their crimes is that management trusts them so much. He also states that even when business owners find suspicious behavior, they often believe it’s inconceivable that employees would violate these trusted relationships. Consequently, management hesitated to investigate, which enabled highly trusted employees - who had easy access to assets and control of operating activities - to hide their activities and resulted in much larger frauds.

Over the years, I’ve heard the catchphrase “trust but verify” espoused by many professionals. Fundamentally, I agree with this statement. However, it’s the internal control portion of this statement that is problematic because employees continuously fail to “verify” that responsibilities have been executed. Why? Some of the standard responses have been “because I trusted them”, “I didn’t think that person would do that”, “this person has been doing a good job for years” and many others that inherently or overtly lead back to trust. How many times have you experienced or head stories about:

  • The employee who stole company funds because he or she was responsible for receiving money, posting payments and depositing funds, had a great work ethic – i.e., they never took vacations and worked weekends. (Control deficiencies were 1) a lack of segregation of duties and 2) a lack of secondary review by an independent party to verify that funds were properly accounted for.

  • The employee who stole company funds because they colluded with internal and/or outside parties and submitted false invoices. (Control deficiencies were that Accounts Payable personnel 1) did not verify the payee was a legitimate company, 2) did not verify that products or services were properly provided, and 3) allowed and did not track payments made through a manual check process.

  • Supervisors who allowed employees to borrow company assets. (The control deficiency was that supervisors did not implement tracking tools to verify that assets were returned. In this instance, supervisors were trained on the policy indicating that employees are not allowed to use company assets for personal use.)

  • Employees opened customer deposit or card accounts without customer authorization. (The control deficiency was that there was no secondary review to verify that customer authorizations were obtained.)

As indicated in the list above, the common denominator is that internal controls were not executed to provide reasonable assurance that organizational assets were protected. Consequently, organizations suffered negative financial losses (including decreases in stock values and fines and penalties from external agencies in some instances). However, the negative impact does not stop there. Negative publicity, breach of trust and lower employee morale, increased administrative costs, and negative financial impacts on other employees such as layoffs or elimination of raises and bonuses can also result from these activities.

Internal controls must be implemented, executed, and address the most significant element of the three-legged stool: Opportunity. Simply put, if you minimize opportunities to conduct fraud, the other elements – i.e., pressure and rationale - are irrelevant. Also, controls will not only assist in protecting the organization, but may also protect the employees from disciplinary actions – for example, termination and incarceration - that will significantly affect them and their families.

In closing, I want to revisit the catchphrase “Trust but verify”. Regardless of our relationship with, or feelings towards others, we cannot assume that we truly know the financial challenges, personal pressures, job dissatisfaction, and other factors affecting the lives of the people around us that cause them to engage in fraudulent activities. To this end, I generally state that we should verify in order to trust. Regardless of the semantics, verification must occur…whether you trust others or not.