One non-traditional way to examine the red flags of corporate fraud is to change your perspective. It’s fine to look at fraud prevention from a position of authority. Ask yourself what employees might do that will “give them away” and what signs you may see in regards to frauds they are committing.
The flip side of that is putting yourself in their shoes, and imagining what it would be like to be engaged in fraud and a cover-up. For many committing fraud against their employer, it is high-stress. That stress is hard to hide sometimes, and may cause clues to surface.
Fraud can also be very gratifying to one’s ego. Imagine “getting one over” on your employer. Depending upon your level of disdain for your supervisor or the executives or the owner, it may be very satisfying to be the one with “the power” in the fraud scheme. Yet this ego trip also can be the precursor to some red flags of fraud.
We left off with some financial red flags of fraud. It is critical for management to be unaware that you have financial troubles. Credit card debt, failure to get a mortgage, delinquency in paying bills, and money mismanagement could all be warning signs because they indicate a need for money. That need could be a motivator to commit fraud, and you don’t want management looking at you any closer than normal.
Please don’t arrive for work with new expensive toys, purchased with the money you’ve stolen from the company. Management knows how much you make, and they know if you can afford an expensive watch or a fancy car. If you’re showing off these expensive items and they don’t fit in with your known income, management may get suspicious.
Try to be as cooperative with management as possible, without overdoing it. If you’re following through on all your job responsibilities, they probably don’t have any reason to scrutinize you. But if you’re failing to perform your job or you don’t want to help out when others need it, you will raise suspicions.
However, you also have to make sure you’re not too helpful. If you are picking up responsibilities at work that will give you access to sensitive information, important records, or company money, management may start to wonder whether you’re purposely trying to increase your access to opportunities for fraud.
By all means, when the auditors show up to do their work, you must be cooperative with them. Give them the documents they want. Make sure they get their questions answered. You might even want to put all the documents they ask for in good order. Don’t refuse their requests, and don’t tell them that you can’t find a document. Failing to produce documents for the auditors is an immediate warning sign. So don’t be overprotective of your paperwork and your information, or they will get suspicious.
Act like you have nothing to hide. Make yourself appear to be an open book.
Final part coming soon....