Steps to Take if You Suspect Fraud in Your Company

by | Sep 10, 2018 | PKF Texas - The Entrepreneur's Playbook®, Tax and Accounting Desk

Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m back again with Danielle Supkis Cheek, a director and one of our Certified Fraud Examiners. Danielle, welcome back to the Playbook.

Danielle: Thanks for having me, Jen.

Jen: Certified Fraud Examiner – clearly handle fraud for our firm – what happens if a company has fraud?

Danielle: The first step if somebody in a company finds fraud is you really should follow your internal procedures on what to do about fraud if you have some. So, if you’re a rank and file employee or even at the higher levels, if you have a hotline, you should follow your procedures to report that to the hotline first. And actually having a hotline reduces the median loss for profit by about half so have a hotline.

After that it gets a little bit harder and more confusing of what do you do once you’re the person receiving the tips from the hotline or if there is no hotline. Assuming you’re in the position to be the head of the company or up there really the first call needs to be your attorney. It really needs to be your attorney. I realize I’m the CPA, but the first call really should be the attorney. Getting the attorney involved on the front end really can help prevent some missteps through the investigation process. The investigation process – you can accidentally do some illegal things as you investigate the fraud.

Jen: Yikes, okay.

Danielle: You could also put your company at more risk than you already were just being subject to the fraud by mishandling your investigation. You could also put in jeopardy the ability to prosecute or go after from a civil side your potential fraud situation if you don’t have an attorney helping guide you on the proper steps.

Jen: So at what point do the CPAs or the forensic accountants come in?

Danielle: After the lawyer. Usually it’s the lawyer that comes in first, assesses the situation, gives us a call or the client brings us in. We actually get a fair amount of calls directly from clients wanting to investigate the fraud right away without their attorney, and we usually try to push back and say get your attorney first. We’re gonna probably spend the most time because financial fraud… they think we need a CPA – and you do – but you also need a whole team together, because the CPA is just one piece of the team. There’s also computer forensics, private I’s; honestly corporate security sometimes gets involved. There are some really sensitive HR matters that you sometimes need even just an HR specialist that’s a consultant, and then of course that kind of pinpoint person of the attorney.

Jen: Now do you recommend – and it’s probably based on the attorney advice – that some of these people be in-house to the company and some of them be external, or do you recommend them all be external?

Danielle: I think it can depend on the situation. A lot of times if a company has really strong HR resources there’s no need to bring in another HR consultant. Sometimes a lot of companies have some very strong accounting resources and the fraud doesn’t necessarily occur within the – or the risk of fraud or the concern of fraud – doesn’t happen within a particular team, so that team may be able to help on the investigation. But if that’s the team that you’re concerned about, you may not want to use them. So, I think it really depends on the facts and circumstances of a particular situation.

Computer forensics, though, is one that’s usually always external to the company. Your IT team at your company may be the best of the best of the best, the problem with it is the evidence collection technique; you are usually not set up for that at a company, and you probably don’t have the right software and the right imaging devices to get that forensic quality image of the computer and be able to have that chain of evidence go through. So, computer forensics is probably the one that you almost always want to use an outside firm for.

Jen: Sounds good. Well, we’ll get you back to talk some more about fraud, because it’s a really interesting topic.

Danielle: Of course. I would love to.

Jen: Thank you. For more on this topic, visit This has been another Thought Leader production brought to you by PKF Texas the Entrepreneur’s Playbook. Tune in next week for another chapter.


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