Tag Archives: CFF

Now That I Think About It…

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When we talk about fraud and how it tends to happen, the classic fraud triangle is most commonly used to help us understand how it all happens. The sides of this triangle represent opportunity, pressure and rationalization. In this triangle there is a person, just a regular old person, like you and me. Fraud can happen to anyone and fraudsters are often regular people who find themselves under pressure, faced with the opportunity to perpetrate a fraud and the ability to rationalize it all.

Sometimes this person may face pressures. Maybe she has a family member who gets sick and now they have to deal with massive bills. Maybe the person has a gambling problem. Maybe he wants to live the jet set life that he sees his friends living. Whatever the reason may be, these people feel under a lot of pressure to get their hands on more money than they are currently earning.

Pressure or not, maybe this person sees an opportunity to defraud. Perhaps he can sign checks, AND, he has custody of the checkbook AND he performs the company’s bank reconciliations. He has all this access and responsibility and no one checking his work. So, now he has access to the money and he can doctor the books to cover up his wrongdoing. However it works out, these people see a weakness that they can take advantage of.

The third leg of this triangle is rationalization. This is where a person tells himself that there is a justification for what he is doing. Maybe she tells herself that she really needs the money to deal with this one emergency and this will happen only once. Maybe she then tells herself that this will happen only once and, to boot, she has been a loyal employee for a while so the company really owes her a little leeway for all that she has done. Maybe she tells herself that once she is out of this spot of trouble, she will pay the company back and it will be like it never happened in the first place. Maybe he tells himself that he is underpaid and that what he is doing is merely taking the money that he is rightly owed for all the hard work and time that he puts into the business. The rationalizations that people use are practically endless.

Earlier this year, I listened to the podcast “Ponzi Supernova”, a podcast about Bernie Madoff’s Ponzi scheme and what has happened since. One thing that was fascinating about this series was the conversations that Steve Fishman, journalist and narrator of the series, had with Bernie Madoff, infamous perpetrator of a massive Ponzi scheme. Bernie talked about his childhood and how affected he was by his father’s financial failures. Bernie tells Steve that, after seeing his father lose a lot of money and what it did to the family, Bernie swore he would never let that happen to him (perhaps one could see this as a pressure looming over his life). In the early 1960’s, Bernie Madoff violated market regulations and his clients’ trust by losing their money on risky deals. Instead of letting them know that this had happened, he lied to his clients, borrowed money from his father-in-law and carried on as though he was a brilliant investor. Speaking with Fishman, Madoff made it sound as though, because he did not want to fail as his father had, he took these steps so that he could continue to, at least, appear to be successful and very talented.

Bernie Madoff spoke with Steve Fishman a couple of years after he was caught (though, in some versions of his story, he claims he quit). Bernie Madoff also spoke with Diana Henriques, who wrote the book The Wizard of Lies, which is now an HBO Film by the same title. Their interactions also occurred a couple of years after Madoff’s fraud was discovered. After he had plead guilty to his crime. Yet, over and over again, Madoff seemed to continue to make excuses for his behavior and try to minimize what he did. Even though, when pleading guilty, he claimed that he acted alone, he has since changed his tune and as co-conspirators have testified against him, he then seems to say, “well, except for that person, I acted alone”. So, it seems that even after being caught, he is only sharing as much of the truth as he needs to and, what I have found to be most interesting, is that he appears to continue to rationalize what he did.

In an ideal world, one would imagine that having a fraud exposed and pleading guilty would bring a fraudster to his senses. When we imagine a person committing fraud as a regular person who has fallen into irregular behavior, the hope is that putting an end to this irregular behavior will bring this person to her senses and get them to admit that what they did was without excuses; that, even though they rationalized their actions when they perpetuated the fraud, they now saw the error of their ways and realized that the rationalizations were all without merit. During the hearing when he plead guilty, Madoff read a prepared statement where he apologized to his victims. However, even that apology came with a “but” attached. “While I never promised a specific rate of return to any client, I felt compelled to satisfy my clients’ expectations, at any cost.” Yet, listening to Ponzi Supernova, you learn that some clients would demand an adjustment to their statements when they did not receive the return they had been promised. Madoff has also placed blame on his victims, claiming that they knew, or should have known, what they were getting into, that he had warned them and that they did not lose as much as they claimed. And, I have found that it is not just Madoff who does this. The Association of Certified Fraud Examiners talks to people who were convicted of fraud and, in video after video, the perpetrators found ways to hold others responsible for what they did – and this is after they had been found guilty and served their sentences. For instance, one blamed her supervisor for being too trusting, “I don’t blame them but…” she started her sentence. Another stated, “I asked you for help and you said no”, while yet another said “I won’t get caught again”, not “I won’t do it again because I realize it was wrong.

It may be human to not want to admit full responsibility. Perhaps it is too hard for most of us to admit that we have done terrible things. Who really wants to be a monster, blamed for ruining lives, even when those lives are laid out in front for you? And if we are not harshly judging ourselves, even when caught, then can we really adjust our behaviors to do right and get back on the straight and narrow? I don’t know the answers to this but it is something I think about as I perform my work as a forensic accountant. If a person is not able to strip away rationalization and admit that they were just wrong when they perpetuated their fraud, then what are the chances that it won’t be so difficult to do it again?

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Cheating Mysteries

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When I first started running long distance, my goal was to run the New York Marathon. After I completed the Chicago Marathon, things changed a little. Of course I still held my breath every year, hoping to make it into the New York Marathon. But I also had another distant dream – qualifying for the Boston Marathon. It was a distant dream because I would need to run a qualifying time in order to get into Boston and my pace at that time was nowhere near one that would get me into Boston. Over the last few years, my pace has improved and qualifying for Boston has become a more attainable dream. Over the years, I have also come to know more runners and have found that many of us aspire to qualify. I know I am always in awe of a person who has qualified for Boston – it is no mean feat.

With the line of work that I am in, I should not have been surprised, but I was, when I read a recent Runner’s World piece about people who cheat to get into the Boston Marathon. I wanted to run the New York Marathon because I was inspired by the runners who ran past my block, the runners who would touch all five boroughs that make up the city that I call home. I enjoy running races in cities and towns that I have never been to, as I find it a great way to visit and discover new places. When I think about Boston, I don’t necessarily think about running the race itself. The power of Boston, for me and for many that I speak with is in what it takes to qualify. That is the challenge. So, when I read about people who cheated by getting someone else to run a qualifying time in their place, or by cutting a course, I was baffled. Where is the joy in telling someone that you achieved something that you didn’t or that you had someone achieve on your behalf? When I speak with fellow runners, I tend to speak with like-minded people who are just as baffled as I am.

This article reminded me that just because one cannot understand the motivations of a cheater, it does not mean that the cheating will not happen. The fact that many of us cannot understand this motivation is exactly what those that cheat bank on. If no one can imagine how or why someone would fake qualifying for the Boston Marathon, the chances are high that a person will get away with faking in order to qualify for the Boston Marathon. This is something that we all should be mindful of, beyond the realms of the Boston Marathon. Way too often, a business owner or manager will forgo instituting checks and balances in their company, because that business owner can’t imagine that anyone that works for them could be the kind of person that would defraud them.

It is important to take steps to keep from being blindsided by your world view. Precisely because you can’t imagine how a person could behave in a fraudulent manner is why you should seek out the services of a forensic accountant, whose job it is to both imagine how a person could defraud you and how to prevent and detect such actions. We all hope that people will be honest, but it is a sad truth that for various reasons, people will cheat. In the context of the Boston Marathon, perhaps some people feel that they are so close to a qualifying time that a little cheat is not such a bad thing. Maybe some people hunger for praise, even if they have not earned it. Maybe some people just don’t think it is a big deal to cheat in order to get into Boston and see it as a victimless crime. In the context of a business, some people may face personal pressures that they feel push them to fraud. Some people may feel that they are not sufficiently appreciated by their employer and may, therefore, feel justified in taking from that employer. No one is immune from the pressures or motivations that lead to fraud, but what we can do is take steps to make it as difficult as possible to be defrauded.

 

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Checking Up

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Several years ago, I was working on an assignment that had me flying out to Boca Raton, Florida, every Monday and returning to New York City on Friday night. It was great because it was a brutal winter in New York City and pleasantly warm in Boca Raton. It was terrible because it was close to impossible to get anything done over the weekend. One week, I had to admit that there I needed to get one of my teeth looked at. It had been causing me some pain and I knew I had to sort it out before it started hurting a lot. My challenge was to find a dentist who took patients on weekend days and who I could get to easily. I found one online and went in to see him on a Saturday morning. He determined that I needed a filling fixed and he got to work. What I remember about that day is how incredibly painful it was and how unsympathetically the dentist kept ordering me to “be strong”. I was traumatized – so much so that I did not go anywhere near a dentist’s office for years after that. I knew I should, but the memory of the pain and a dentist who was in need of a heart kept me away. Other aspects of my body were very well taken of; I went to my annual physical and that was always a pleasure, compared to my dental disaster. I brushed my teeth but, other than that, they were pretty much on their own.

One nights, I fell asleep while sucking on a throat sweet and, the next morning, I woke up feeling as though my teeth were about to fall out of my head. I was in a panic; I was too young to be toothless. I was desperate and looked up dentists located close to my office. Thankfully, I was able to find a dentist, a few blocks away, who was able to fit me in that very day. As he examined me, a poem from my childhood, “Oh, I Wish I’d Looked After Me Teeth” ran through my head. Fortunately, this time around, I get to keep my teeth. My dentist was a great guy who doesn’t believe in causing pain and suffering and NEVER says to me, “be strong”. I did, however, have to go through a series of appointments to repair the damage that had accumulated over the years that I had avoided the dentist, dentist I could have avoided. I have not missed an appointment since, although I get nervous when the machine turns on, even just to polish my teeth.

Like my teeth, a business needs regular checkups to maintain its financial health. Yes, a lot of companies review their financials on a monthly or quarterly basis, but how many are assessing their control systems and taking steps to update and analyze how they prevent and detect fraud? The fact that the median length of a fraud is 18 months before it is detected and that many frauds can last many years as in the cases of Bernie Madoff and Rita Crundwell, to name a few high profile cases, implies that these steps are not taken often and rigorously enough. No one really thinks that it will happen to them and some people think that their finance department, accountant or auditor will keep them safe from fraud. This is because they do not fully understand the roles and duties of their auditors and accountants. Other people don’t want to spend the money on fraud prevention and detection. However, when you start thinking that Rita Crundwell stole over $54 million and a quick search of the internet brings up many other recent cases of embezzlement of millions of dollars that have been discovered. There are many more that either have not been recorded or are of lesser amounts.

Think about this:

  • Fraud goes on for an average of 18 months but many go on for much longer.
  • Usually fraudsters start out stealing a little money but as times goes on and they are not caught, the amounts stolen grow and grow and grow
  • The knowledge that a company has allowed theft to go on under its nose for years can negatively affect its reputation, leading people to believe that it may not be a safe and ethical place to do business

These are just a few things to think about when it comes to detecting and preventing fraud in your company. It only makes sense to get a qualified Forensic Accountant, Certified in Financial Forensics to assess and evaluate your companies systems in order to beef up your fraud prevention programs and also, perhaps to detect possible fraud? Now, I learnt a very painful lesson before I started to take care of my teeth. Do you want to learn a hard, and possibly expensive, lesson before you take proper care of your business?

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Ripped From My Headlines?

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“Aren’t you excited that they’re making a show about you?” This is how my friend, Tabeel, greeted me this morning.

A show about me and I haven’t been telling you all about it? Well, let me tell you, I’m as surprised as you are, but very delighted about the news. It’s about time. I watch way more than my share of crime shows. I have watched so much vintage Law & Order that I can pretty much tell when we are going to move from the Order to the Law and I can see a twist coming a mile away. When I see a new crime show being advertised on TV, I am pretty much always willing to give it a chance. I am held back from watching more crime-related shows because there are only 24 hours in day and I waste a lot of that time sleeping, working and interacting with the real world. For all the great and wonderful things that the shows do for me, I have a recurring gripe.

Every once in a while, on these shows, the investigators will have to solve a money-related issue and they’ll call in the forensic accountant. The guy, and it’s always a guy, who shows up always looks like he has not seen the light of day in years and appears to have forgotten how to interact with other human beings. His clothes and hair are out of style and the other investigators only put up with him because he talks, geekily, about where the money that they are trying to find went. The forensic accountant is that one guy on the show that no one wants to be. I mean, the coroners are more exciting than the forensic accountant and they deal with corpses!

But all of that is about to change. It is as though someone with access to a television network has been listening in on my conversations and hearing me yelling at the television. Tabeel shared with me that Shonda Rhimes is adding a new show to her resume, “The Catch”, and this show is a show about a forensic accountant. Not a show where a forensic accountant is released from the dungeon every once in a while, to look at numbers. The main character is a forensic accountant and the forensic accountant is a woman! Finally, someone found the right ear to whisper in – the stereotype is not reality. There is so much more to a forensic accountant than we have seen so far on television. At last, someone has decided to make a show about me!

I mean it totally has to be a show about me, right? A female, forensic accountant who is likely to be kick-ass and have many clever and insightful things to say. That’s totally how I roll. I look forward to this show, in between the dramatic twists and cliffhangers, highlighting some of the processes and nuances of what forensic accounting is about.It may begin a movement until finally Law & Order FAU (Forensic Accounting Unit) is launched. The forensic accountant is busting out of the basement and she’s taking no prisoners! Well, there probably be a lot of prisoners but you get what I’m saying. Look out for it, set your DVRs and dive into the world of the crime-fighting CPA!

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2015! Three Years, Three Words…

James Petrozzello

James Petrozzello

Three years ago, I was inspired by Tom Hood, by way of Chris Brogan. As someone who gave up on New Year’s resolutions years ago, partly because I was not very good at keeping them, partly because I would change my mind about them and partly because I would often lose track of where I had written them down, I found power in the concept of Three Words. I embraced the magic and power of three during my lessons in Latin and in rhetoric. I have found my three words a great theme song that plays in my head throughout the year. They pop up in conversations, in my planning and often at unexpected, random moments. And this year, the magical and powerful three are Receptive, Synergy, and Service.

Receptive: This year, for Christmas, I gave my husband a Bluetooth headset. Ever since I came across my first Bluetooth headset, I have hated those things. People walk around with those things constantly plugged in an ear and it always seems to me that they are only giving you a small piece of their attention and are, essentially, waiting for something more interesting and important to beep in their ear. I have often felt as though people wear the headsets to make themselves feel important and busy. Around Christmas, when my husband mentioned that he wanted one, I started thinking about the Bluetooth headset in a different way. He spends a lot of time travelling and alone in an office. It makes sense that, should he wish to answer the phone, it would make sense to be able to do this and still be able to use both his hands. He has promised to put it in his ear only when he needs it and to not wear it when we are together. Beyond me and my relationship with the Bluetooth headset, I am realizing more and more, how essential it is to success and happiness to be receptive to new (and old) concepts and ideas. At work and as a part of the various boards and committees that I serve on, I have discovered how essential it is to listen to the opinions of others and process them before concluding how I feel about a situation or idea. At times, the ideas of others are better than anything that I had considered; other times, after taking their opinions into consideration, we can come up with a great plan or compromise. In order to continue the spirit of my words from last year, Transform, Pursue and Collaborate, being receptive is key.

Synergy: Last year, one of my words was collaborate. There is the saying, no man is an island, and I have found it to be true. I have lived and learnt in many places and my world and experiences have been touched by an incredible spectrum of people. All this has contributed to who and what I am today. Collaboration is so very much of getting things done but, this year, I want to hone in on synergy. I want to really think about the wonderful notion of how one plus one can equal more than two (sometimes significantly so). So collaboration will not be solely for the purpose of doing things together; to do this without thinking about how to best leverage the power of collaboration can be wasteful, frustrating and diminish the contributions of each party. I want to be mindful of the concept of synergy and ask myself, often, how can we do this so that what we achieve together is greater than what we could achieve acting alone.

Service: I have talked before about the CPA’s obligation to “serve the public trust, honor the public interest, and demonstrate a commitment to professionalism.” As a forensic CPA, this is a very important aspect of our profession. Often there are pressures upon us and, it is at times like this, that it is necessary to act with integrity, in order to honor our obligation to the public and to our profession. As a member of various committees of my State Society of CPAs and the American Institute of CPAs, and as I prepare to take over the presidency of our chapter, I, along with my fellow members must always keep in mind that our goal is to serve the public, our members and our profession with the work that we do.

A couple of years ago, my husband, James, and I traveled to Berlin for a wedding. I had often told him how much I love karaoke and so, when we heard about Bearpit Karaoke, we had to find it. The place was packed and the singers were excellent. My husband encouraged me to put my name down to sing. After hearing the caliber of singers, and after seeing how many people were in attendance (a dauntingly large crowd), I hesitated and tried to make excuses. He finally convinced me and I put my name on a long list. I was told that I probably would not get a chance to sing as many people were ahead of me and they were shutting down soon. I was pretty okay with that – it was enough for me to have been part of the crowd and to almost get a chance to sing. At six o’clock, the time the karaoke was to end, we were just walking away when I heard my name being called. I was nervous and James whipped out his camera. As I got onto the stage and introduced myself and the song I had chosen, Fame, an old man in the crowd caught my eye and gave me a thumbs up. As I sang, the crowd joined in for the chorus and a little kid ambled onto the stage. When I had moments of panic, I looked at him and took courage from his cute face, gazing up at me. Because I chose to be receptive to the idea of singing in front of this crowd, I found that I added a joy to our day that was magnified by our coming together in happiness. And, of course, what a gift and public service this Bearpit Karaoke is. If you are in Berlin, go and get yourself some joy.

The spirit of my words
From 2013: Change, Discover and Motivate
From 2014: Transform, Pursue and Collaborate
carry on and to that spirit I add my three for 2015
Receptive, Synergy and Service.

What are your three words will bring you magic and power this year?

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Watchoo Talkin’ ‘Bout

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Before I studied accounting, I went to college and got a degree in economics and mathematics. Armed with this degree in issues of money and numbers, I figured that accounting would be a relative walk in the park. I had learnt about debits and credits in economics, I had created intricate formulae in mathematics and I had tested theories on what had happened during the Salem witch trials in statistics, so I felt more than ready for accounting. Boy, was I wrong.
It had been a while since I had felt so overwhelmed. Nothing that I read made sense to me. When I asked my coworkers, who had been studying accounting for a while, they were confused. How could I not understand the accounting concepts. I was studying the most basic things – how could it not make sense. I spoke to my parents and warned them that I might not last in accounting. I prepared them for my failure. My mother, who had taken some coursework in accounting, stated that she had faith that I would work things out. It’s nice to have family who have faith in you, even when all around you look at you like you are the biggest dummy about. She encouraged me to look at some of the books that she had, “Maybe they will help.” I did and, fortunately for me, I found a book that explained accounting in a way that made it all clear to me. I almost couldn’t believe that it had been so difficult before. Now, I felt like I had a brain and it was more than luck that had gotten me through college the first time around.
As I have mentioned before, forensic accounting is a specialty practice of accounting where the work done is suitable for a court of law. The work done here is in anticipation of or as a result of litigation. Often a forensic CPA, usually Certified in Financial Forensics, will testify as a forensic expert before a judge and jury. Forensic CPAs are also often expected to present reports to their clients, to judges or to juries. Because most of the audiences that forensic accountants speak to are not financial experts in any way, it is imperative that they can communicate their work in a way that is understood by all the parties that they deal with. One of those parties could be you.
Many people that I talk to, who have accountants, have no idea exactly what their accountants do, or why. What they are is grateful that their taxes are filed on time and that they either had a small tax liability or a decent refund. This should never be your attitude with your forensic CPA and you should not give the time of day to a forensic accountant who does not explain everything to you. When it comes to forensic issues, you, as a client dealing either directly with a forensic CPA or through a lawyer, are the party to the potential litigation. Doesn’t it just make sense that you know exactly what is going on? Also, if they can’t explain things to you, how much faith could you have that they will be able to explain it to anyone else? My attitude is, if they are not doing a good job with me, and I’m the one hiring them, how can I expect them to do a good job anywhere else?
You should have a forensic accountant that you understand, are comfortable with and doesn’t treat you as though you are not smart enough to understand the complicated work that they do. Yes, the work they do can be very complex and involved but, part of being a good forensic accountant, is being able to take this complicated work and explain it in a way that can be understood by a jury of ones peers (generally a jury of people who did not major in accountancy). I often hear the phrase “explain it as though you are talking to a six year old”, but I would be happy if it was explained to me like someone was talking to an economics and mathematics major. Don’t let them make you feel dumb. Chances are, if they do, they may not be so clever themselves.

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The Sheriff in Town!

When I first went to university, I was unsure what I wanted to major in. I had been considering chemistry, because I fancied that I might be the person to come up with a cure for AIDS. At the idealistic age of 18, I was so sure that I could use the colorful magic of gas chromatography to come up with a solution that many experienced scientists with doctoral degrees had been unable to discover. I signed up for a chemistry class and, I decided to take an elective in economics. I was hooked after my first class and ended up majoring in economics. I was fascinated by various theories and the push and pull between fiscal and monetary policies. I did come away from my class knowing one thing – I wanted to work for the Federal Reserve System, home of US monetary policy. To me, to be part of an organization that was focused on what to do in order to best positively influence the economy of the entire nation was awesome! Federal Reserve Banks issue the money that we use; how cool is that? I remember going to a campus career fair and spending most of my time there chatting with a representative from the Fed. Following that conversation, getting a job at the Fed was my dream. One big obstacle stood in my way; at the time, I was not a US citizen. I was devastated but I still dreamt that one day I would either be a citizen or the Fed would change its policies, whichever came first. At the time, as an economist in training, my dream was to be an analyst.

As time has gone by (I am a citizen now) and I have gone on to add becoming a CPA and then getting Certified in Financial Forensics to my skill set, my interest in the Fed and what it does has grown. After graduating, with my degree in economics and mathematics, I went on to work at a bank, where I was an analyst. I was very excited about the opportunity to apply the theory I had learnt in college. I had not bargained on how people are not very good at following the rules, be they the rules of logic or the rule of law. I mean, how many times have you said, “Who would do that,” or “Why did they act that way? It doesn’t make sense”? Yep, we humans use our free will in the nuttiest ways. Just last week, I read a crazy story about a Georgia woman filing a tax return for a $94 million dollar refund. Every aspect of the story is insane, from her 100 dependents to thinking that she could pick up her refund check at a local Kroger grocery store, and yet she is neither the first or last person to attempt this kind of thing. So, after the monetary policy folks have come up with their ideas about how best to influence the economy, there need to be the people who make sure that people are not breaking the rules and people who create control systems and audit them to minimize the risk of people breaking the rules. This is where forensic accountants come into play at the Fed.

Forensic Accountants, both those Certified in Financial Forensics and those who are Certified Fraud Examiners, can be found in the audit and enforcement areas of the Federal Reserve System. The saying is that love makes the world go around, but we are all aware that money is a big motivator for who many people behave. I have written about the fraud triangle and how people in positions of trust and authority will break the law in pursuit of illicit gain. With this in mind, it is vital to assess and improve control systems to make sure that, starting at the top financial institution, there is little opportunity for those who feel the pressure to commit financial crime. If the top bank cannot keep money safe, what hope is there for the rest of them? The Fed has bank examiners whose goal is to ensure that banks comply with laws such as those governing anti-money laundering and doing business with nations and people that the US government has imposed sanctions upon. The Fed plays an important role as an independent third party that will objectively assess operations at the banks that they supervise to make sure that they are not, for example, helping criminal rings hide their ill-gotten gains.

There are twelve banks in the Federal Reserve System and each bill of paper money that you have incorporates, in its serial number, the letter assigned to bank that issued that bill. Pull out a banknote, be it a dollar or a $100 bill, it will have the letter of the particular Federal Reserve Bank that issued it, be it Boston, San Francisco or any of the ones in between. In the case of the dollar bill, the name of the issuing bank is also noted on the bill. It goes almost without saying that the institution that issues the money that we use should have top notch controls. Each Federal Reserve Bank, therefore, has audit departments that are constantly reviewing it and making sure that the banks are complying with the rules. The auditors also work to improve systems. Every day, people are spending a lot of time and energy trying to figure out how to game the system and so those at the Fed should spend at least as much time and energy working to keep the banks safe and compliant.

Though my focus has changed, my excitement when it comes to the Fed is unabated. Not only are they working on monetary policy, they are also working to make sure that the rules are not being broken and that the opportunity to defraud, steal or abet crime is diminished. Take a look at the money in your wallet and think about what goes into making it worth what it is worth.

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Hear Ye, Hear Ye! It’s The Future!

 

Toward the end of June, I went into the New York State Society of CPAs offices (very lovely offices, I must say) to be part of a roundtable discussion on the future of the accounting profession. The discussion was distilled into a piece in August’s CPA Journal. Personal interest aside, it is a great read with a diversity of opinions on various issues regarding the CPA profession and the value of the designation. Along with me were three other professionals, all with different career paths within the designation of CPA. Somya Munjal is the founder of CPA for the People, which is a CPA services, business consulting and social venture firm. She is also the founder of Youthful Savings, whose mission is “empowering the next generation with financial education and entrepreneurship training”. Michael Durant is working on his master’s degree in taxation, while pursuing his CPA designation. That’s right, a master’s in taxation; that should begin to convey just how complicated taxation can be. Michael is also the cochairman of the advisory board for the Bronx School of Law and Finance, a school that he is an alumnus of. Jordan Frey is a senior account in EisnerAmper’s private business services group. As you can see on the company’s website, the group provides a wide range of services to businesses of all types and sizes. And then there is me – figuring financial forensics. So, in a room of four CPAs, you have a tax man, a social venture, financial education and entrepreneurship training guru, a private business services expert and a forensic accountant. Walking into the room, I was encouraged to find that I was in a room with people who validate my claims about the variety of professional paths that a CPA can take. It’s always a good feeling when your claims are validated.

We had a very interesting discussion about the different directions in which our CPA designation was taking us and, for all the differences in career we had, we had some real similarities. We were drawn by the high standards and ethics that are integral to being a CPA. I have written about how a CPA is considered to be a trusted professional, a characteristic that is an asset in someone you are dealing with when it comes to financial matters. I am happy to find that I am not alone. It is one thing for me to stand on my soap box and wax lyrical about the virtues of the CPA; it is completely something else, in a very good way, to be in a room with others who feel as passionately as I do about what we do.

I am sharing our conversations with you and, if you feel as though reading The CPA Journal diminishes your street cred, you can throw in a little Wu Tang Clan as your backing track, as you read a little bit about the future…

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Here’s My Number And A Dime…

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“If you see something, say something”. Living in New York City, this is a message I come across often. I see it advertised all over the subway, I see it on buses and I have even seen it on television. Although the messages tell us to inform a police officer, MTA employee or call a toll-free number in the cases that we do see something and want to say something, I have often thought about the logistics of this. On my way home from work, I tend to end up in the last subway car. Now, say I get onto the train and I see something and I want to say something. I am in the last car and can barely see the subway conductor who is in the middle of the train. Do I try to run up the platform to get to the MTA employee before the train doors close and the train sets off? Do I perhaps hope that there is a police officer that I can alert, hanging out on the subway platform? My subway station is one of the few that now has cellphone reception, so I could call the toll-free number. However, I have never taken the time to actually take the number down so I have no idea what it is. All this said, I like to think that, on the day that I do see something and need to say something; it will be like the movies and things will fall in place and work out.

Previously, when talking about controls, I have discussed the importance of the segregation of duties and how having several people involved in a process means that there are other people who are watching what is going on and who, therefore, can report any untoward activities that they see. Annually, the Association of Certified Fraud Examiners (ACFE) publishes a Report to the Nations on Occupational Fraud and Abuse. The 2014 report stated, “Over 40% of all cases were detected by a tip – more than twice the rate of any other detection method.” That is a staggering statistic and emphasizes just how important people who see and say something are when it comes to fraud detection. The knowledge that there is an easy way for fraud to be reported may also serve as a deterrent to those contemplating committing fraud. In response to a series of huge financial scandals that led to losses in the billions of dollars and the end of companies such as Enron and WorldCom, the Sarbanes- Oxley Act was passed in 2002. Among its various provisions, it required that publicly traded companies establish a whistleblower system that makes it easy for employees and third parties to anonymously report financial misdeeds.

There is a television show called “The First 48”. The premise of the show is that the chances of solving a murder are cut in half, if investigators do not get a lead within the first 48 hours. On a few occasions, I have watched as detectives go from door to door in a neighborhood, asking people if they know anything about the homicide that occurred. Generally, the police are met with silence, shaking heads and closing doors. However once they get back to the police station, their phones start ringing and people leave anonymous tips that often lead to an arrest. Anonymity is a very important aspect of creating a whistleblower system. The fear of punishment for reporting fraud, such as being fired, demoted or even physically attacked, can keep a witness silent. It is vital that a person knows that they can safely make a report and remain unidentified, should they wish to do so.

There should be several reporting options available to the whistleblower, such as the telephone, an electronic system and U.S. mail, giving the whistleblower the opportunity to use the method that they are most comfortable with. Also, the system should be available 24 hours a day, 365 days a year. With the whistleblower hotline, a trained interviewer, who knows how and what to ask the caller should answer the phones. The last thing a nervous caller wants to deal with is voicemail.

In order to make the whistleblower system most effective, a corporate entity’s staff, vendors and other third parties need to know that there is a way that they can report wrongdoing and that action will be taken. This means that a company with a whistleblower system should distribute literature and hold training sessions on ethics, processes and how to report any financial wrongdoing. Several years ago, I caught a cab from Manhattan to Brooklyn. During my ride, the cab driver complained about having to drive to Brooklyn and tried, several times, to drop me off at a subway station. I insisted that he take me to Brooklyn, as I had requested. He then spent the rest of the ride swearing and protesting. Once we reached my destination and I stepped out of the taxi, he yelled out the window, “Bitch”, and drove off. Suffice to say, I was upset by this experience. Shaking, I walked into the building and called 311, New York City’s non-emergency information and complaint service. I told the operator about my experience and gave her the taxi driver’s medallion number. She took my report and asked whether or not I wished to remain anonymous. I chose not to, wound up facing the driver in a hearing, and winning my case. I did all this because I did not appreciate how the taxi driver had treated me and felt that I should not let him think that it was okay for him to behave in that manner. More importantly, I did this because I knew about and had access to an easy, and well-publicized service where I could lodge my complaint and have my issue investigated and resolved.

I have mentioned that publicly traded companies in the United States are mandated to set up a whistleblower system. It is in the interest of other entities to consider a system by which anyone who comes across financial crime can report the crime, knowing that something will be done about it and that no one will come after them for making the report. Sometimes something as simple as an anonymous mailbox can make a big difference – just knowing that there is a way to report crime gets people reporting crime. Then again, as an employee or a third-party, such as a vendor or a customer, there may be times when you feel as though the corporate culture is so corrupt that no one within the company will respond to your complaint. At times like this, you should look to the law for assistance. In New York City, you can call 311 for guidance and assistance. You can also visit the District Attorney’s website for information on how to report a financial crime. The power of people speaking up when they see something amiss cannot be underestimated and voicing your concerns is easier than you imagine; remember whistleblowers are the number one (by far) way in which fraud is discovered. So, really, if you see something, say something. You don’t even have to worry about the train leaving you behind.

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