We rotate and change the tires on our cars, we have insurance on our homes, we try to eat healthy and stay active.
Why? To prevent bad things from happening in the future.
It’s the same for a business owner and business fraud, said David Anderson, principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley.
It makes much more sense, he said, to implement anti-fraud measures now to save you from incurring big losses later.
So, Anderson rhetorically asked, why don’t more businesses, non-profits and government offices implement fraud deterrence procedures?
“My experience shows that there are two main reasons more organizations don’t have fraud deterrence programs,” he said, “and they boil down to management not understanding how easily fraud occurs or how easily and cost effectively it can be prevented.”
Anderson said the initial issue is that business leaders don’t believe fraud ever could occur in their organization. Most managers feel their employees are trustworthy and loyal and also because they believe that they would inherently somehow “know” if fraud was occurring. Secondly, he said, owners and executives think, incorrectly, that fraud deterrence programs are expensive and time-consuming, making the cost outweigh the benefit.
“In reality, given the appropriate opportunity, even the most trustworthy and loyal employees can find themselves under pressure to commit fraud,” said Anderson, a Certified Fraud Examiner. “In fact, it often is the most highly trusted employee who turns out to be the fraudster.”
He said management is generally so focused on running its business that it has neither the time nor the inclination to examine financial details that might reveal evidence that fraud is occurring.
On the cost issue, Anderson said organizations need to understand that the median cost of fraud has been set by the Association of Certified Fraud Examiners at approximately $145,000 for each occurrence. But basic fraud deterrence procedures – such as management review of financial reports; a fraud hotline; a code of conduct; mandatory vacations; job rotation, and surprise audits – cost significantly less than that. Even with the addition of fraud deterrence training for managers and employees, the cost remains significantly lower than the median cost of just one case of fraud, he said.
“We all take preventative measures to forestall bad things from happening,” Anderson said. “We brush with fluoride to prevent tooth decay. If a faucet or pipe starts to leak, we call the plumber before it worsens. And we spend $40 to change the oil and oil filter on our car to avoid paying hundreds or thousands of dollars in engine repair bills down the road.
“Establishing anti-fraud controls is the same thing,” Anderson said. “If you engage a Certified Fraud Examiner to design a cost-effective fraud deterrence program for your organization now, you are greatly lessening the chances that you will be the victim of a more expensive fraud in the future.”
If you have reason to suspect that fraudulent activity is already occurring in your business, non-profit or government office, Anderson recommends that you immediately request a comprehensive fraud investigation be conducted by a Certified Fraud Examiner from an experienced firm that provides forensic accounting services in Philadelphia and the Delaware Valley. The longer you postpone a fraud investigation, the greater your losses are likely to be, he said.
If you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at firstname.lastname@example.org.
About David Anderson & Associates
David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley. The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services. Company principal David Anderson has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.