Lack of fraud education, the best opportunity for a perpetrator

Economic crimes are the virus and, in many cases, the biggest disease that a corporation can suffer from. Negligence, indifference, or irresponsibility can all be the seed that causes fraud, collusion, and corruption to develop. Regardless of the cause, in order to know the size and extent of the problem, we must face it directly. 

All of us who work in the administrative, financial, and accounting areas have the immense responsibility of protecting organizations from adverse events. However, many of us were educated solely in the fundamentals of taxes and finance where it was assumed that everyone was operating in an ethical manner; therefore, investigating the signs of economic crimes against the company were in another sphere. Nevertheless, nowadays, we have seen these crime grow rapidly. In many cases, we conclude that the lack of financial knowledge and experience in looking for the telltale signs of crime are some of the primary reasons that accentuate the losses due to fraud.

When we go to the doctor, we hope that some vital signs such as blood pressure, temperature, weight, body mass index, and others, will provide the physician with the first estimation of our health situation. Additional follow-up tests will help the doctor to better define what is happening. If the symptomatology requires it, the doctor will send us to a certain specialist to obtain a more precise diagnosis.

Like a good doctor, we as accountants and managers should forecast cases of fraud. Just as a doctor requires education and experience to help a patient, we have the responsibility to have the education and experience to prevent and detect fraud. Additionally, and in the worst case where fraud is evident, we should have the skills and tools to investigate it.

As a result, the analysis and evaluations of financial statements must be done and updated proactively. We should not expect a legal requirement or negotiation to mandate the review of all past information and the projection of the business' future. 

A good accountant or administrator uses accounting and financial information to detect which data have changed and which do not align with business expectations. In addition, a good accountant must be capable to formulate financial indicators that relate different accounts to detect inappropriate transactions. Likewise, a well-prepared accountant should be experienced in clarifying errors and verifying if there is fraud. A skilled accountant has the corporate facts in his or her head and never loses sight of them. For instance, reviewing those financial indicators on a regular basis helps to evaluate the company's behavior and fix any mistake. Hence, financial analysis and evaluation are the basic tools to find the meaning of an organization's numbers and detect those that are not aligned to the goals of the business. If necessary, a specialist in forensic accounting should be contacted to help complete a full investigation.

A perpetrator or fraudster is perfectly aware of the lack of fraud prevention. It is much more difficult to commit a fraud when there is a professional following up on the company's economic indicators and facts. A white-collar criminal loves the opportunity to commit fraud when accountants and managers are not sufficiently educated and do not have the expertise to detect abnormal situations. Fraudsters prefer companies in which professionals are highly engaged in activities that do not add value to the company and have no education about economic crimes. Consequently, fraudsters always want to help and participate in the simplest activities to hide their crimes.

Today, I invite you to reflect on our role in society and our responsibility as professionals to determine how well we are interpreting the symptoms of corporate financial chaos. It is time to evaluate our financial skills focused on the prevention of fraud through interpreting the vital signs of the organization.

Economic crimes do not let up, and the perpetrators take advantage of our weaknesses on a daily basis. Today, more than ever, expert professionals with holistic thinking are required.

Editor: Christopher Bonk