ACFE Fraud Report Fingers You

My fraud IQ sucks. The Journal of Accountancy told me that when I took the "What's Your Fraud IQ" quiz in the August issue. I usually do pretty well. Not this month – 40 percent. I should've cheated. The answers are right there. But like you, I live my life according to a Code of Professional Conduct and am therefore committed to maintaining my integrity, especially when taking quizzes found in magazines. (According to Cosmo's "Are You a Good Flirt" quiz, I'm a "too-coy chick." I have so much integrity sometimes my penis falls off.) I am also committed to maintaining my competence. Here are some of the knowledge balls that I caught in my learnin' mitt.

According to the ACFE's 2012 Report to the Nations on Occupational Fraud and Abuse, in 35 percent of fraud cases, the perpetrator exhibited the behavioral red flag of living beyond his or her means; and 27 percent of fraudsters were experiencing financial difficulties. Those appear to be interesting statistics until you flip them around. Apparently 65 percent of fraudsters are living within their means, and 73 percent have no financial difficulties. Sounds like the typical person who commits occupational fraud is awesome at personal financial management. Dave Ramsey must be so proud of them. What kind of a-hole has plenty of discretionary income, no pecuniary shortcomings, and steals money from work? Either that pisses me off, or it's a completely useless data point.

The 2012 Report to the Nations also lists the following as characteristics of likely fraudsters: 
In a staff-level position.
Male. 
Between the ages of 31 and 45. 
Between one and five years of tenure at the victim organization. 
The holder of an undergraduate degree.
Employed in the accounting, primary operations, or sales departments. 
First-time offenders.
 
Way to narrow it down to like half the people who work at every business. That list describes me, and since you're reading Going Concern, there's a good chance it describes you, too. But now that I know that I'm considered high risk, I'm going to keep a closer eye on me. Because according to the ACFE, I'm dangerous, and I'm a badass. And this is really my only chance to ever become a victim of profiling.
 
Apparently an individual attempting to conceal something may use and repeat oaths – statements like, "honestly," "to tell you the truth," and "I swear by the moon and the stars in the sky." It's no surprise that country singer John Michael Montgomery is a lying sack of crap, but it appears as though this also indicts individuals who say things like "verily, verily I say unto thee." Too far, ACFE, too far.
 
But there's more:
Deceptive individuals are much less likely to voice direct denials to an accusation, and their denials are more likely to grow weaker with repeated accusations, whereas an honest individual's denials typically will grow stronger. 
So, according to best practices, when you're conducting your next fraud interview, repeat the question, "You stole all that fucking money, didn't you?!?" at least four times, and measure the strength of the interviewee's denials with a Digital Denial Strengthometer. 
 
To tell you the truth, most CPAs get into accounting because they prefer the certainty of numbers and math. Honestly, we're not that good at things pertaining to human behavior. But I swear that we can get better as long as we realize that identifying behavioral red flags is a soft skill and not a checklist to find a bad guy.

 

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