Fraud and Assessing Employee Performance
1.Think in terms of a privately-owned company; how can we convince a small business owner that his nephew has too much control in the business? I know a tire shop owner who has his entire family working for him. His niece, nephew, and son run the show while he sits back and smoozes with long-time customers. His nephew not only cuts deals for regulars, but is in charge of purchasing and receiving. (Talk about a recipe for fraud).
Unlike large corporations in which your circle of influence goes beyond the Client, with small business owners, if you cannot influence the owner to consider your recommendations, your review will be an exercise in futility.
What techniques can you use to influence a Client?
2. Speaking of exploring, how about establishing a fraud tipline? Recently, we implemented an 800 # that employees can use to report fraudulent activity. We created 1" x 2" stickers to place on each telephone handset, and 3" x 4" stickers to place on forklifts, cash drawers, and loading docks. Our thought process is the more visibility we bring to areas with the greatest exposure to fraud, the more likely our "concerned" teammates will step up and let us know.
Are stickers enough? What else can a company do to create awareness to fraud? Anyone heard of a "Think Shrink" program?
3. When assessing employee performance, let's not forget the four styles of coaching: directing, coaching and supporting, facilitating, and delegating. Once an employee has been trained, the level of motivation to perform the task has to be considered. In order for coaching to be effective, the leader , the follower, and the situation must all be aligned. You have to make sure to use the correct coaching style based on the situation and the employee's ability and motivation.
Simply training an employee and having him / her sign a training checklist does not guaranteed the desired level of performance. The employee still has to be led. That is where an auditor can play huge dividends for a client. Often, clients are too close to the situation and lose their objectivity. With an auditor's 'fresh-set-of-eyes,' we can add valuable perspective regarding the most effective coaching style to use to get the most out of employees.
How can the coaching model be integrated into the audit?
4. Despite our best efforts to promote the use of the Hotline, employees choose not to use it for fear of repercussions. Although most employees may not use it, the one time someone does may be the golden nugget that saves the company significant amounts of money.
For example, after weeks of inactivity, an employee left a message that his manager brought a gun to work for a brief show & tell session. Because the employee knew about the Hotline and felt comfortable using it, the company may have averted a PR nightmare.
You see class, although your recommendations may not be pay dividends right away, if you can convince your Client that the process will add value to his / her business, it may pay off down the road, and that is how you will build your name as a qualified and value-added auditor.
What types of Loss Prevention Training Programs can auditors recommend to build employee awareness?
5. Stakeholders seem to expect auditors to detect accounting frauds, and yet auditors' opinions carefully avoid making that claim. If auditors can't deliver on stakeholder expectations, what value do they offer stakeholders?
6. Describe the tolerable exception rate and how you would use this as an auditor. Explain how you would determine the rate you select.