Tag Archives: CPA

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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Paying It Way Forward

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Bert N. Mitchell

Last night I attended the New York State Society of CPA’s (NYSSCPA) Moynihan Fund Gala. I was looking forward to a fun night with my colleagues, looking out on the water as the sun set and enjoying good food and drinks. What I did not expect was the incredible history lesson that I received from Lifetime Award Honoree, Bert N. Mitchell. In 1987, Mitchell became the first black president of the NYSSCPA and, during his tenure, the NYSSCPA launched the Career Opportunities in the Accounting Profession (COAP) program. I was already aware of these very impressive aspects of Bert Mitchell’s career, but, as he shared his life story, I found that these achievements were only scratching the surface.

Mitchell shared, last night, that he was the 100th black CPA in the United States. This statistic hit harder when he shared that he earned this qualification in 1965, a little more than ten years after Bernadine Coles Gines became the first black woman to become a CPA in New York and the 34th black person to become a CPA in America. Even though it was 11 years after Gines had encountered many obstacles on her journey to becoming a CPA, Mitchell did not find things to be much easier when he graduated, at the top of his accounting class, in 1963. Despite his top-notch qualifications, Mitchell spent two weeks seeking a position at one of the top accounting firms, preferably, one of the Big 8 (at the time). He travelled from lower Manhattan and worked his way to Midtown, stopping in at every major CPA firm and, over and over again, he was turned away, with the excuse that their clients’ attitudes regarding hiring a black person were why they wouldn’t give him a job. In 1968, the AICPA launched the Committee on Recruitment from Minority Groups and Mitchell was one of the five black members of the eleven member committee. A year later, in 1969, Mitchell published a study entitled “The Black Minority in the CPA Profession” and this study found that underrepresentation in the CPA profession was worse than in law, medicine and other professions. This study found that out of 100,000 CPAs in the United States, fewer than 150 were black and firms claimed, as they had to Mitchell when he was seeking employment, that the barrier to hiring African Americans was not their own bias but that of their clients.

In a follow-up to the 1969 study, Mitchell published a study in 1975 that showed that the number of black CPAs had tripled to 450. As encouraging as this information was, there was still much to and, as became apparent, Mitchell was nowhere near done. When Mitchell became president of the NYSSCPA in 1987, the stats were depressing. Black people made up almost 13% of the population, yet they made up less than one percent of CPAs. In comparison to other professions, only airline pilots had lower representation. Representation by other peoples of color was not much better – Latino representation also hovered around 1% and Asian representation was about 3%.

When I heard Bert Mitchell’s speech last night, I knew I needed to know more and when he mentioned that he was the 100th black CPA in America I, fortunately, knew exactly where to go. When I met and was moved and inspired by Bernadine Coles Gines, I went out and bought the book “A White-Collar Profession, African American Certified Public Accountants Since 1921” by Theresa A. Hammond. This book, published in 2002, tells the history of African Americans in the profession. I knew I would find him in there, not only because of the incredible work that he has done to expose people of color to the CPA profession, but also because I remembered that the book included a list of the first 100 black CPAs in the United States. I got home and there he was – “100. Bert N. Mitchell 1965 New York”.

At the Gala, as three alumni of the COAP program took to the stage and shared their stories of how the program and not only exposed them to the CPA profession but also made them believe that this was possible for them, I was deeply moved by the work and efforts of Bert N. Mitchell and others who, like him, have been dedicated to diversity and inclusion in our profession. Pick up the book, read it and learn more about Mitchell and the other first 100. This is not ancient history, it is actually amazing how recent this history is. It is hard to pass the CPA exam. It is a daily challenge to maintain the standards and knowledge that make us trusted professionals. It should never be a struggle to be hired because of your race, gender or sexual orientation. I am truly in awe, as Bert N. Mitchell, truly has dedicated his life to advocating for diversity and fairness in the profession.

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Who Is The Accountant?

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I have been excited about watching “The Accountant” for over a year, when I first heard about this movie – a film about a forensic accountant! I lived in fear of the project being canceled by film bigwigs, who would decide that no one wanted to see a movie about an accountant. Accountants are almost never depicted, on screen, as anyone worth one’s time. You can’t love or hate them, they are too boring to think about. But here was a movie and the filmmaker was so confident about it that he called it “The Accountant.”  I would tell people how excited I was about the film and they would almost always express surprise that anyone would want to make a film about a CPA, let alone watch one. I don’t blame them because just about every time I have seen a CPA being portrayed on film or television, I don’t want to be him (and it is almost always a him). He is a guy with zero social skills that people put up with because he is some kind of numbers-whisperer; a guy who can find secrets in the numbers that the true heroes are too busy being interesting to find. So, on Sunday, I dragged my husband, who is a true saint, to the movie theaters to watch “The Accountant.”

From the previews, you will see that Ben Affleck, the Accountant, seriously lacks social skills and does not appear to have any friends. He is, as a forensic accountant, a super numbers-whisperer who gobbles up financial statements for breakfast, lunch and dinner.  However, he is also the hero and is an incredibly interesting guy who can do all the running, jumping and full mystery solving that heroes can! They also threw in the story of Crazy Eddie and his “Panama pump”. I may have been the only person in the movie theater who exclaimed in excitement when that came up, but the story of Crazy Eddie is one of many years of various fraud schemes, ranging from money laundering and tax evasion, to financial statement fraud.  I had a great time watching this movie and, I even forgave the woman who yelled out a spoiler reveal before it happened.

It seems that many had been convinced to try out a film about a forensic accountant. “The Accountant” won the box office this weekend, by a massive margin that you don’t have to be an accountant to understand. This gives me hope for the future of CPAs on the screen (big or small). I can see it now – characters who are at least as interesting as lawyers and doctors. We may even be portrayed as people who can tell funny jokes, who can be engaging and who can even have friends: I am excited about films that break long-standing stereotypes. Maybe I am getting ahead of myself, but I will say something that is a first, with respect to how I feel about a CPA of any kind on TV or on film. I watched this movie and I came out wanting to be a forensic accountant!

 

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Massive Betrayal of Trust

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Photo by Mamnaimie Piotr

On September 8, the Consumer Financial Protection Bureau (CFPB) put out a press release that it was fining Wells Fargo Bank $100 million for secretly opening deposit and credit card accounts, without customer approval. In addition to the CFPB fine, Wells Fargo was fined $35 million by the Office of the Comptroller of the Currency, $50 million by the City and Country of Los Angeles and will have to pay approximately $5 million in restitution to customers. This fraudulent behavior occurred on a massive scale and, based on the CFPB’s investigation, resulted in:

  • Employees opening 1,534,280 unauthorized deposit accounts;
  • Employees submitting applications for 565,443 credit-card accounts, without the knowledge or consent of the people in whose names the applications were made;
  • Employees creating fake email addresses in order to enroll consumers in online-banking services;
  • Employees requesting debit cards for customers, without the customers’ knowledge or consent, and creating PINs to activate these cards.

All of the above has happened only since January 1, 2011. That is about five years in which these shenanigans were going on. During this time, Wells Fargo fired about 5,300 employees but it does not appear that the bank did a lot more than that to change the culture and systems in order to keep these practices from recurring, or that it took any steps to do right by the customers who were affected. To boot, the executive who oversaw the unit where this all happened left without having to pay back any of the almost $125 million that she earned with the bank. To understand why employees engaged in these dishonest practices, it is important to understand how they benefitted.

Wells Fargo is valued at over $250 billion, making it the most valuable bank in United States, by this yardstick. Wells Fargo was also considered to be the king of cross-selling. Cross-selling is a practice where banks sell more than one service to a customer. For instance, say you open a checking account with Wells Fargo. If the person that you open your account with convinces you to then open a savings account, a credit card account and a mortgage, all of that is cross-selling. At Wells Fargo, employees were paid and received bonuses based on the number of different services they were able to sell to customers. At times, employees would have to work unpaid overtime hours in order to reach these goals and would be threatened with losing their jobs if they did not do enough cross-selling. These employees were told to do “whatever it takes” in order to meet sales goals and this turned out to include engaging in the fraudulent behaviors I noted above.

With the pressure to perform in order to increase earnings, through bonuses, or merely keep a job, the retail employees, at least 5,300 of them, found many opportunities to game the system. Controls at Wells Fargo, when it came to ensuring accounts were valid and authorized by customers, appears to have been very lax. For instance:

  • Employees were able to sign up customers for banking services and would use fake email addresses that used wellsfargo.com as the domain name, such as 1234@wellsfargo.com or none@wellsfargo.com. Doesn’t that seem rather brazen? It also seems like a security shortfall on the part of the bank, that the application process wouldn’t flag an email that doesn’t exist in your own system.
  • When employees opened fake deposit accounts, they would fund these accounts by transferring a customers money from an authorized account to the fake account. Sometimes, as a result of the transfer, the authorized account would incur insufficient balance and overdraft fees. Also, the fake accounts would also incur fees and Wells Fargo would withdraw money from the authorized accounts in order to pay these fees.
  • In a similar manner, credit card accounts opened, without the approval or knowledge of customers, would incur annual and other fees. At times, these customers would find that they were in collections and their credit scores had been affected by accounts that they did not even know they had.
  • Some customers actually received credit cards for accounts that they had not authorized. When these customers contacted Wells Fargo to complain about these cards, they were told to simply destroy the cards. Destroying a credit card does not close the credit card account, nor does the shredding of a card do anything as far as the shredding that your credit profile may have taken.
  • In order to meet quarterly goals, employees would hold back applications for account openings. The manual applications, that included sensitive personal information, would be stockpiled in an unsecured manner and the accounts would only be opened in the next sales goal period, in a practice referred to as sandbagging.
  • Wells Fargo also misled customers by telling them that they could not get one service without getting a bundle of other included services. That would be like opening a checking account and being told that you cannot do so unless you open a savings account and get a credit card with the bank.

With how widespread these practices were, it seems that employees were sharing knowledge about how to best bulk up their cross-selling numbers, without actually cross-selling. Also, when customers complained about fees, it is unclear how much of a follow-up there was to discover if what had happened was a mistake or not. Then, when Wells Fargo discovered this behavior and fired an employee, the bank did not take any steps to let the impacted customers know that their information had been used to open accounts in their name and, if applicable, charge them fees. The bank did not go back and refund customers the fees they had been charged, unless the customer raised a stink about them. When I was discussing this case with my husband and explaining how customers were negatively affected, he had a tale of his own. He has a credit card (not Wells Fargo) and the company changed his credit card information, without letting him know. When he sent payment on his account, they accepted the payment, without telling him that the account was closed, and then charged him interest and fees on the balance that had been moved to a new account. He, not the credit card company, had to figure out what had happened and he, not the credit card company had to calculate the monies that needed to be refunded to him and make sure that the company was not just holding money on a nonexistent account but actually crediting it to his account.

As a result of this case, in addition to the fines that Wells Fargo has been ordered to pay, there are steps the bank has been ordered to take in order to improve the culture and strengthen the system so that this kind of behavior can be prevented, detected and corrected in the future. This includes:

  • Employee training to prevent “Improper Sales Practices” and improve integrity at the bank;
  • Creating monitoring processes and policies to effectively deal with customer complaints;
  • Creating systems to ensure that customer approval is received before accounts are opened on their behalf;
  • Revising the basis for how employees are paid and reviewing sales goals to ensure that they are not unrealistic and do not impose unreasonable pressure on employees.

Wells Fargo will continue to be monitored for five years, to make sure that they comply with the CFPB’s consent order.

On your part, with all your accounts, you can check to make sure that they accounts that you have are ones that you have authorized and that transactions made in your name are valid. Some steps that you can take are:

  • Review your credit report on a regular basis to make sure that all accounts listed are ones that you know about. Several financial institutions offer free credit reports to customers. If this is not an option for you, you can visit the Annual Credit Report website. On this website, you are entitled to credit report per year, from each of the three major credit reporting companies. A strategy to employ is to check a report with one agency every four months;
  • Check your bank statements regularly (at least monthly) for any transactions that are incorrect. Even if it is a small amount, look into a transaction. That small amount could be an indication of something bigger;
  • If you receive a card in the mail that you did not apply for it, follow-up on it and make sure that it is cancelled. Then check your credit report again.

On the Wells Fargo website, the Chairman and CEO states that “Everything we do is built on trust.” It seems that many employees have been playing lip service to that value and we know that, even with trust, it is important to verify. Take the time to check in on your finances. There may be mistakes that need fixing and there may also be pressured employees who are trying to get ahead or merely hold onto their jobs by engaging in dishonest practices.

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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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When To Fold ‘Em

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We are a household of sports fans and this tends to be just about the only live television that we watch. Because we can’t fast forward through the commercials during live games, I have watched commercials about daily fantasy sports. A lot of commercials about daily fantasy sports (DFS). It doesn’t matter whether it is DraftKings or FanDuel, as they both seem just about the same. I have heard about how you can win millions, practically for free, and about how easy it all is. I know nothing about fantasy sports, and I have come away mostly irritated by how ubiquitous the advertising is than wanting to try out the daily fantasy sports scene. I also don’t trust them when they tell me that I could win money for nothing and, instead, I wonder how they could claim to give away so much money for nothing and still pay for the many, many ads that are everywhere we look.

Answers came to me at the beginning of October, when a DFS scandal hit the news. As the story went, a DraftKings employee released key information earlier than he should. This information, if known, would give someone a tactical edge when playing fantasy football. The same employee also won $350,000 betting at FanDuel. Even though this doesn’t look good, DraftKings says they are certain that, even with an extra $350,000 in his pocket, their employee did not act improperly – he merely made a mistake. As I read the story, I shook my head in disbelief. I was surprised by several things. First of all, I was surprised to discover that Daily Fantasy Sports betting is not considered to be gambling. Now, I know hardly anything about daily fantasy sports, so it may indeed be a game of skill and not luck. However, especially with terms like “betting” used when talking about it, it sure does look a lot like gambling. That said, interviews that I have seen and read show those who spend a lot of money on DFS referring to it as investing. Nevada recently shut down DraftKings and FanDuel, declaring that DFS is gambling and that the two companies need licences before they can operate in that state. So, in that regard, let’s go with more and more people are agreeing with me on the whole “is it gambling” question.

More surprising, though, was the employee betting. To have a company that runs the betting allow its employees to bet as well smacks of impropriety, regardless of whatever steps the companies claimed they took to keep things on the up and up. Both FanDuel and DraftKings would not let their employees bet with them but those same employees, armed with whatever insider information they might (or might not) have, were able to go to competitor sites and bet there. And bet they did and how surprised are we to find out that the top winners in daily fantasy sports tended to be employees of DraftKings and FanDuel (though never from their own employer, of course).

As I read articles and watched news pieces on what was going on in the Daily Fantasy Sports realm, I kept exclaiming, to anyone within earshot, “who thought this was okay? How could they think it was okay?”

I couldn’t believe that management at this company could look at the set up was acceptable. Maybe they did, or maybe they just thought they could get away with it but it has me wondering about what operation and control policies other entities have in place that either do not protect them and their assets, or even put them at greater risk. Just because you institute a rule, it does not mean that it is a good or useful rule. For instance, DraftKings employees, with all the inside information they potentially had access to, could not place a bet with their employer, DraftKings. However, they could log into FanDuel, their competitor and use their edge when placing bets there. And the policy was mirrored by FanDuel. Looking in from the outside, both companies appeared to be acting unethically, and just about always, perceptions are as powerful as reality. If it looks as though someone is having a $350,000 party with your money, the facts will matter very little to you.

It might feel very managerial to make rules in your organization, but if all they serve to do is fill operations manuals and make you feel good, they are achieving less than nothing. It is worse than not making rules at all because, at least when you don’t have regulations, you have no illusions about whether or not you are protected. On the other hand, creating a free for all entity may make you feel like the cool kid and may even have people clamoring to work for you. However, among those clamoring, it is almost guaranteed, will be those seeing ample opportunity to commit fraud and perhaps lay waste to your business. There are very important reasons why people like me preach setting up your business in ways that prevent and detect fraud and two of these reasons are protecting your assets and protecting your reputation.

Now, FanDuel and DraftKings are finding themselves on the defensive and being given the cold shoulder by entities who do not want to be tainted by the growing scandals. They are being investigated by state and federal authorities, and are now scrambling to clean up an image that would never have been sullied if they had formed their operating and control structures correctly and ethically, in practice and appearance, from the get go. Now they are tripping over themselves, doing things like creating self-regulatory bodies in order to regain the trust of the public. Judging from what I have read, that is not working very well – something that happens when a company has betrayed the public’s trust. Instead these companies are being put under the microscope and their reputation is taking a beating. They are on the defensive now and all of this could have very easily been avoided. If you are running a business, you should ensure that you consult with a qualified professional to avoid issues such as:

  • Conflict of interest in perception and reality;
  • Approaches that compromise your reputation; and
  • Procedures that may cross legal lines.

Spending time and resources doing things property in the first place is less costly, in dollars and reputation, than trying to clean things up after the damage is done. That kind of disaster can be very difficult to come back from. Is it something you are ready to bet on?

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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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That’s Not How It Goes

canine_side-eyeI am a huge sports fan. Huge. It is just about the only time that I tend to watch live television. The drawback, in my opinion, is that I have to watch all the ads on television, even the ones that get on my nerves. It is a sacrifice I am willing to make in order to get my game in real-time but, sometimes, I wonder. We are in the midst of basketball and tax seasons and the two have, apparently, come together to try to give me an aneurism or, at the very least, high blood pressure. You see, there are a variety of tax preparation related ads, declaring that it is time to get the mountains of money due to you and how easy it is to just do it all yourself, while you’re at it. I just hold my head and mutter, “no, no, no, no!”

Ad after ad trumpets that the product advertised will get you the largest tax refund around. So, what happens when you file your taxes and you don’t get a big refund; maybe you don’t get a refund at all? Do you get upset? Do you feel that your tax preparation software or professional has done wrong by you? But a refund is the government paying you back money that you overpaid them in the first place. Getting a large refund doesn’t mean that you lucked out and won the government lottery; it means that, over the year, you sent the government too much money and now the money is sending that money back to you, interest free.

Refund tales aside, there is the matter of how complicated the tax code is, something that even the Internal Revenue Service (IRS) writes about. The 2014 Tax Guide, a publication that the IRS puts out to help guide individuals who are filing their taxes is a daunting 288 pages long and that’s before the references in the guide for further information on the subjects covered. So, I am sure you can begin to understand my frustration when I see ads that imply that preparing a tax return is as simple as baking a cake. It is unclear how long the tax code is currently, but what we do know is that it gets longer and more complicated by the year.

Computer software is incredibly helpful, when it comes to tax preparation. However, it is paramount to keep in mind that the software is a tool and it will not automatically make you an expert, knowledgeable of the ins and outs of the tax code. If your tax return is straightforward, the chances are that you will be okay filing your own return. Say, however, that you have a business; do you know which of your expenses are deductible and which are not? If you are married, and you decide to file separately, instead of jointly with your spouse, do you know what the differences are between the two? What about if you have spent the year speculating, buying and selling assets, or if you gambled a lot and have significant winnings or losses? The software can only work with what you give it and what if the software doesn’t ask you the right questions in order to get as much information needed in order to have as accurate a tax return as possible?

At the end of the day, the IRS holds you responsible for errors in your tax return and the amount of taxes you pay (and what you claim as a refund). The last thing you want is to be hit with a notice telling you that you owe the IRS a bunch of money because, when they do that, they tend to also charge you interest and penalties. Some tax preparers will tell you that they will cover only penalties and interest due to errors on a tax return, but what about the erroneous tax refund that you have already spent? Yup, only you have to deal with that. It seems like the punishment is a lot worse than just messing up a cake recipe, right? So, I’m thinking that getting a qualified professional, such as a CPA, to prepare your taxes might be worth your investment. Don’t go with someone who promises you the largest refund; go with someone who has studied the law and takes continuing education to stay up to date on the intricacies of the tax code and not only how you will be affected federally but also on a state and local level. Yeah, state and local – I didn’t even go into all that. Find someone who knows what they are doing and who can tell you what is going on and why. Or, you could try to tackle the bigger than the bible tax code and do it all yourself. You’ve got time, right?

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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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