COVID-19 Resources

Flattening the Fraud Curve

Written by Sarah Clement Magette, CPA and Paul Perry, FHFMA, CISM, CITP, CPA on March 31, 2020

Warren Averett Fraud Image

If it’s been said once, it’s been said a million times – we are in uncharted territory. Seemingly mundane, non-complex business processes are suddenly uncertain and confusing, surrounded by dozens of questions. Who will process payments to vendors? Who will manage cash receipts? Is the bank account being reconciled timely? Couple the unanswered questions with high levels of anxiety among employees, and we have an increasingly stressful work environment. Lest we give credence only to the negative, let’s talk about the positives of having routines disrupted – the discovery of fraud.

On the Bright Side

Companies should anticipate that current disruption in routines will bring to light fraud, as schemes unravel given the changes in the way we are being asked to work. Management should pay attention to employees who cannot conform to new norms and policies related to staying away from offices and working remotely. Consider; is an employee’s insistence to work from the office founded, or do they fear that someone else intercepting the mail will lead to the discovery of their fraud scheme?

As owners and managers are faced with business continuity decisions, current processes and operations are being evaluated. Looking at things from a (albeit forced) new perspective allows for the enhancement of policies and procedures. As you become closer to the day-to-day operations of the business, be on the lookout for red flags.

With employee’s schedules shaken up, management will receive new insights into how their business is conducted, which may identify red flags.

Flattening the Curve

New opportunities to commit fraud within your business will be created as our country works to “flatten the curve” during this health pandemic. As employees are operating in non-controlled business environments while quarantined or performing “social distancing,” duties previously segregated may be performed by one individual. Controls may be bypassed due to the extenuating circumstances. Further, incentives for fraud will likely increase over the coming months as economic uncertainty creates fear and financial insecurities among employees. Protect your business by staying involved, being proactive, performing thorough financial performance reviews and stressing the importance of maintaining proper support and evidence for work performed under the current, independent work environment.

What to do if you Suspect Fraud?

If you suspect fraud, do not question or confront the person or work to investigate the matter on your own. Engage your management team and work within your chain of command to determine the appropriate next steps. While you may run across fraud once or twice in your career, control professionals with experience working on fraud cases and engagements are skilled and trained to efficiently and effectively investigate suspected fraud. As a best practice, seek an experienced, trusted advisor to assist you in navigating the investigation and lighten some of your burdens during these uncertain times.

 

This article reflects our views at the time this article was written and should be used as reference only. We recommend that you talk to your Warren Averett advisor, or another business advisor, for the most current information or for guidance specific to your organization.

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