Preventing Fraud: Is the Answer Sitting in the Office Next Door


Fraud prevention. We are not all aware of this phrase, nor does it always top the list of concerns for business owners. However, this phrase is synonymous with internal controls, which is a familiar term to most CPAs and business professionals.

Strengthening internal controls is easier said than done. Segregating duties and creating multiple review procedures may be expensive or inefficient. It has been my experience that the hardest part for business professionals, when implementing internal controls, is knowing where to begin. Let me preface that last sentence by saying internal controls is not chess, it’s checkers. Finding out where the primary fraud-risk areas are should be the number one objective. A business can determine these areas with one easy step…ask.

Who should you ask? Specifically, individuals who have access to, maintain, or account for assets within the company. People who work in accounting, finance, inventory, etc. are all great people to ask. These employees have the best knowledge of how the current internal control structure can be manipulated or overridden. They have noticed the loopholes and they have seen the weaknesses.

Most honest employees have no problem expressing their concerns with policies and procedures to management when asked. Not only do they have the opportunity to express their ideas, they are also providing vital information on the location of fraud risks. An individual in accounts payable may tell you it would be very simple for him to issue a check to himself without detection. The warehouse manager may say that inventory shrinkage would drop in half if there were security cameras. Susan in payroll may indicate that the current timekeeping system is outdated and other employees could easily pad their weekly hours.

These are just a few examples of concerns that have surfaced when conducting internal control examinations for other organizations. During the questioning process, not only can you receive vital information on internal control weaknesses, you may find out about actual instances of fraud or theft occurring within the entity. According to the Association of Certified Fraud Examiners’ 2014 Report to the Nations, 42.2% of fraud incidents were initially detected by tips. Of these tips, 49.0% came from employees.

It is important to note not all employees are willing to admit internal control weaknesses to their superiors. This may be a result of the following:

  • They may feel responsible.
  • They are afraid to make management aware of their weaknesses.
  • They may be taking advantage of the weaknesses for personal gain.
  • They may simply believe there are no deficiencies.

In these instances, many organizations request that professional fraud prevention consultants assess the internal control structure and interview employees within the organization. These professionals are not only trained in assessing fraud risk, but will ask the right questions to allow employees to think differently about the processes and procedures they use every day. Professionals can also identify red flags in employee responses and accurately identify areas where risk for fraud may be highest. These areas can then be tested for anomalies or suspicious activity.

Preventing fraud from occurring in a business starts with internal controls. Prioritizing specific areas to implement new controls does not have to be a difficult process. If you don’t know…just ask.

Diploma Mills


Definition: Companies that sell “degrees” on the internet without requiring the buyer to do anything more than pay a fee.

Shocking statistics from a May 20, 2015 editorial in The New York Times asserts that “there are 3,300 unrecognized universities worldwide, many of them selling degrees at all levels to anyone willing to pay the price, and that more than 50,000 Ph.Ds. are purchased from diploma mills every year – slightly more than are legitimately earned.”

The competitive job market has made education qualifications more valuable than ever so it is not surprising to see that job candidates are embellishing their qualifications. The Federal Trade Commission provides the following clues to help you spot questionable credentials on a resume or application. Look for:

  1. Out of Sequence Degrees. When you review education claims, you expect to see degrees earned in a traditional progression — high school, followed by bachelor’s, master’s, and doctoral or other advanced degrees. If an applicant claims a master’s or doctoral degree, but no bachelor’s degree — or if the applicant claims a college degree, but no high school diploma or General Educational Development (GED) diploma, consider it a red flag, and a likely sign of a diploma mill.
  2. Quickie Degrees. It generally takes time to earn a college or advanced degree — three to four years for an undergraduate degree, one or two years for a master’s degree, and even longer to earn a doctorate. A degree earned in a very short time, or several degrees listed for the same year, are warning signs for the hiring official or the person doing the preliminary screening.
  3. Degrees From Schools in Locations Different From the Applicant’s Job or Home. If the applicant worked full-time while attending school, check the locations of the job and the educational institution. If the applicant didn’t live where he went to school, check to see if the degree is from an accredited distance learning institution, using the steps described under ‘Checking Out Academic Credentials.’ If the degree is not from a legitimate, accredited distance learning institution, it may be from a diploma mill.
  4. Sound-Alike Names. Some diploma mills use names that sound or look like those of well-known colleges or universities. If the institution has a name similar to a well-known school, but is located in a different state, check on it. Should you come across a degree from an institution with a prestigious-sounding foreign name that calls for some homework, too. Researching the legitimacy of foreign schools can be a challenge, but consider it a warning sign if an applicant claims a degree from a country where she never lived.

A background screening provider can help you verify that the school, professional program, degree(s) achieved, and date the degree was awarded are accurate to what a candidate is reporting on their resume. If the applicant is still attending school, dates of attendance can also be provided. Verifying qualifications can protect you again negligent hiring claims in the future.