Something happens within finance and accounting people, or maybe something exists in their personalities as well that limits probing, outbound action. Maybe the tendency goes beyond F&A people too, in that even management people many times get passive in not being suspicious, asking questions, “trusting their gut” ESPECIALLY if the questions potentially could lead to wrong-doing by someone…or maybe they just don’t want to “get involved” because, “it’s not their job.”
I believe this management deficiency is something that just has to be overcome within companies, organizations, government institutions, everywhere…IF we are to continue to make dents in fraud detection…or just in getting to effective and sound business practices.
Let’s start with skepticism.
As business people, we spend lots of time (and pride in) figuring things out…it’s one of the things we do. We’re trained to understand transactions, how to account for them, how to negotiate, how to get our activities finished…better, faster, cheaper, smarter. Yet, when it comes to that natural curiosity or skepticism, or impartial examination, I’ve seen people fall short in a couple of key ways. First of all, skepticism seems to halt when potential evidence appears to suggest cutting corners, then bending the rules, minor infractions…you know, that slippery slope that perps seem to blame for their wayward behavior. Secondly, if the potential evidence is not simply rationalized-aside and ignored, the observer takes the approach that: it’s not my responsibility to pursue this; or, I would never “accuse” someone of improper behavior; or…”there he/she goes again” and chalk it up to “I can’t fix them.” So, beyond just choosing to ignore the behavior, or not understanding the responsibility to be looking for odd behavior (recall that “TIPS” is the most effective source of uncovering fraud—from employees, customers, vendors, even “anonymous”) the greater issue is likely NOT with a lack of skepticism. It is with the reluctance to act. IF we are naturally curious, IF we are skilled in figuring things out, IF we have suspicions of poor business processes, sloppiness, risk, opportunities for improvement, and all of those things…why don’t we find ways to identify and remediate them? Because, where these things exist, or are tolerated, or whatever…means that there’s a higher likelihood of fraud too…and we just allowed our reluctance to act to be one of the impediments to finding and fixing it, and that simply allowed the perps’ actions to continue. The Association of Certified Fraud Examiners bi-annual “post-mortem” study on thousands of fraud cases indicates that the average fraud goes undetected for 24 months. And one cause for that lengthy timeframe is, in my opinion, on the part of the people who could/should readily detect it… “A Reluctance to Act.”