Pay for Fraud Deterrence Now — or Fraud Losses Later

Remember the old auto oil filter company commercial with the tag line “Pay me now or pay me later?”  The advertising message being sent was that the small upfront cost to replace your car’s oil filter now could prevent more costly repairs in the future.  The same can be said about fraud deterrence programs — the lower cost of implementing anti-fraud measures now could save you big losses in the future.

So, 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 and they boil down to management not understanding how easily fraud occurs or how easily and cost effectively it can be prevented,” 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.

Anderson said the first problem is that management often cannot fathom that fraud could ever occur in their organization, usually because they staunchly believe their employees are trustworthy and loyal and also because they believe that they would inherently somehow “know” if fraud was occurring.  Secondly, he said, management mistakenly believes 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.”

Anderson 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 see our doctor for an annual physical to catch any problems early on.  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

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.