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Do You Need a Forensic Professional?

Numbers floating around man examining calculator with magnifying glassPLUS: Four ways to improve your systems.

By Ed Mendlowitz
77 Ways to Wow!

Various professionals and consultants can set up controls with in-house accountants, the CFO and financial professionals employed by the firm, but they then leave, and the organization is left with administering it. Unless there is a highly disciplined and committed leadership within the company, the initial enthusiasm dissipates soon after.

MORE: Forensic Techniques Can Be Fraud Deterrence | Anatomy of a Fraud | How to Explain Internal Controls to Clients | Organization Minutes Too Often Overlooked | The Seven-Minute Financial Statement | The KPI an Absentee Manager Needs
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A trained forensic professional will detect flaws and cracks in systems and plug them up. They are also transaction-oriented, more than procedure-oriented, so they examine more closely how things are being done and look for subtle deviations from how they are supposed to be done. This skill should be employed in oversight and periodic monitoring of the controls they helped establish.

Some obvious flaws exist in many systems. Here are some examples and ways to add some control:

  1. The person who writes and mails the checks to pay a bill also receives the bank statement and performs the reconciliation of that account. With this there is no control or oversight whether payments were proper and not misdirected because the person is “checking their own work.” Having a different person reconcile the accounts adds an element of control.
  2. Merchandise is ordered by a person who also receives it, places it in inventory and authorizes the payment. There is no oversight of the products received, that they were actually placed in inventory or that the right material was ordered or even received. Adding a different person to the process anywhere along the way can provide a control to thwart any theft.
  3. Employee theft can occur at any point if temptation is blatantly put in front of otherwise honest people. Not always, but occasionally. Petty thefts of packages of coffee and office supplies, up to scrap metal, inventory items like parts and finished products, can be easily taken without adequate controls. It is hard to secure coffee and office supplies, but parts and inventory can be controlled with a protected location and perhaps a video camera recording activity in and out of the area.
  4. Salespeople can pad their expense accounts and time workers can find ways to punch in earlier than when they show up or later than when they quit for the day. Simple controls can impede many of these stealth frauds such as with periodic but regular spot checks.

Forensic professionals can also work with in-house accountants to set up controls to monitor and measure business performance data, such as:

  1. Unit production
  2. Sales and inventory size
  3. Trend analyses of a series of summaries or compilations of transactions
  4. Reconciliation of activity from multiple sources
  5. Tracking the transaction flow from a sequence of product and paperwork movement
  6. Monitoring the usage of websites and length of time on the site
  7. Throughput of orders and timeliness of fulfillment

For hospitals and hotels, the measures could be:

  1. The trends of occupancy rates
  2. Demographics of patients or customers
  3. The source of the customer

For restaurants,

  1. Table turnover
  2. Number of covers ordering appetizer
  3. Dessert or side dishes
  4. The busiest weekday times

The point is that no matter what the business, there is essential information that can be captured and presented to the managers where the reliability is quite high. When forensic accountants perform an investigation, these are among the types of transactions they review, chart, capture and use to develop their presentations. Experienced forensic professionals have their own databases and key performance metrics for almost every type of industry.

Businesses are organic and need minding. Part of this is to have adequate controls that do not tempt personnel to steal. Forensic professionals have the skills to establish, train, implement and monitor systems and controls and follow through on tweaks and digressions. They should be the first person whom clients turn to when they need a system repaired or installed. The right system also serves as a deterrent to those who are not otherwise predisposed to cross the line and sends a strong signal of the likelihood of their actions being uncovered.