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QuickBooks CPA discusses Fraud

QuickBooks CPAs love the software, but recognize it’s a relatively easy program to commit fraud with. Proper setup helps of course. I’ve presented numerous articles about how to decrease potential fraud on this website. But today I’m going to concentrate on the motivation of fraud.

The AICPA (American Institute of CPAs) has a tight association with the ACFE (Association of Certified Fraud Examiners). ACFE presents lots of good information on fraud by examining known cases and then compiling the various factors.

In the August 2012 Journal of Accountancy, ACFE says that 80% of fraudsters exhibit behavioral warning signs. They cite living beyond their means as a chief example. This observation by the ACFE doesn’t lend itself to fraud prevention in most cases. They also mention that only 5-10% of fraudsters have a prior criminal record. This presents a problem in the hiring process since 90-95% of fraudsters would pass a standard background check. Maybe a credit check is prudent? CPAs know the IRS often imputes a suspect’s cash flow during their “lifestyle” tax audits. But the IRS has access to more information, staff and resources no employer has. So, how can an employer know if the employee is cash strapped? You can’t, at least by looking at their cars, houses, vacations etc. It sounds cynical, but sometimes employees reveal this through casual conversations e.g. “My husband worries about our house being foreclosed.”

Perpetrators are most likely to be:

  • Male.
  • Between 31 and 45 years old.
  • Have an undergraduate degree.
  • Hold a staff level position.
  • Be in the accounting or sales department. Look for employees with a tight relationship with a vendor or customer.
  • First time offenders

“During our annual ethics training, CPAs are often told that almost everyone would steal, at least under extreme circumstances involving their perceived needs and opportunity.” 
 –  Gary Bode, QuickBooks CPA

No QuickBooks CPA will guarantee they can lock down QuickBooks so tight that no fraud is possible. CPAs explicitly state they cannot detect all instances of fraud. But there are common sense techniques that have been developed over centuries. The essence of these is closing the vault; how many times would you walk past an unguarded, open bank vault without grabbing some cash?

I’m a QuickBooks CPA because almost all of my clients use QuickBooks. I try to setup up QuickBooks so that the owners have a chance of analyzing their accounting data for managerial decisions. I also try to setup QuickBooks to prevent fraud. For a free phone consult, please call (910) 399-2705.