Why do employees blow the whistle?

James Holzrichter believed he was doing the right thing when as an eager young analyst and systems auditor in the 1980s for an American aerospace and defense technology company, he innocently brought some problems of material acquisition and management to his supervisor. Ultimately, Holzrichter discovered anomalies that led to a “qui tam” suit (under the U.S. False Claims Act) against his company for alleged fraud of overcharging the government and selling it defective equipm

Fraudsters targeting your phone, college prep and paycheck

Katie Franklin recently received a telephone call that didn’t seem unusual at first. Her caller ID indicated that it was her bank, and the caller knew some of her personally identifiable information (PII), including the last four digits of her debit card and Social Security number. However, Katie became suspicious when the caller asked her to verify both of these important pieces of information. She was smart enough to hang up because she suspected that the call was a scam. K

Using data analytics to find fraud under those shells

Google the phrase “shell company fraud scheme” and you’ll discover more news stories than you have time to read. In Southeast Asia, an employee stole $11 million using a false-billing shell-company scheme. In the U.S., a company lost $65 million through a similar scheme. Fraudsters are using shell companies to steal millions of dollars from organizations every year. Shell companies are business entities that typically have no physical presence (other than a mailing address),

Stopping the clock on employee time theft

A growing subtle threat of time theft in the workplace jeopardizes developing organizations, according to time-keeping software companies. Employees can unknowingly and casually steal time. Or they can willingly and fraudulently malinger. Time theft can morph into serious crimes, such as payroll fraud schemes. (See the sidebar, Ghost employees haunt organizations' payrolls.) Charlie worked as an hourly, full-time staff accountant for a CPA firm. He usually punched in the digi

Moral equilibrium: Charitable donations and other good deeds might be indicators of fraud

Whether it’s by giving your time, money or other resource, how would you rate your generosity on a scale of 1 to 10 if 1 represents little or no generosity, and 10 represents being generous almost all the time? Now that you have your number, can you recall an act of kindness you performed in the past week? Can you also recall a time in the past week when you had the chance to do something generous for a family member, friend or even a stranger but chose not to? Considering th

The synthetic ID you can't see

A call rings out on a police radio: “2-Charlie-34 to any available kilo unit reference a Signal 53 in progress.” In plain language, a patrol officer has just asked to speak with a detective from the economic crimes unit about a fraud in progress. A detective answers, and the officer on the scene tells him that he’s taken a man into custody at an auto dealership for attempting to purchase a vehicle and attain financing using a Social Security number (SSN) in the application th

Accelerating anti-fraud innovation

The changing fraud risk landscape at XYZ Inc. was challenging Linda, the global head of investigations, to adapt. New fraud risks had emerged because of recent acquisitions into new markets and technology updates in the organization. Linda believed XYZ wasn’t prepared for the fraud risks. She wanted to gain more business transparency into specific payments to third parties and sales activities of her company’s employees. Her goal was to innovate, but where should she start? A

During tax season beware risks of losing your identity

Most mail carriers are honest and hard-working employees. But some residents of Phenix City, Alabama, are glad not to see mailman Demetrius Jones come to their houses anymore. On Aug. 29, 2018, a federal grand jury returned an indictment against Jones for his role in a fraudulent federal income tax refund scheme. His co-conspirators allegedly filed fake federal income tax returns for refunds after stealing personally identifiable information (PII) from numerous sources, inclu

Why don't auditors find fraud?

In “Alice’s Adventures in Wonderland,” Alice asks the Cat: “Would you tell me, please, which way I ought to go from here?” “That depends a good deal on where you want to get to,” said the Cat. “I don’t much care where —” said Alice. “Then it doesn’t matter which way you go,” said the Cat. The story illustrates a very important point for everyone: We have to know where we’re going to get anywhere. As fraud examiners, we certainly face that issue. We must know where we’re going

Who's more susceptible to fraud?

In the mid-’90s, when I was working for a global high-tech firm, I received a call from a fast-talking stockbroker with an unmistakable Brooklyn accent representing a company I never heard of — Stratton Oakmont. “Are you looking for a unique investment opportunity?” he asked. I told him I already had a financial advisor, but he was persistent to the point of being irritating. He schmoozed me with questions that led me down a path where I found myself agreeing with his asserti

Bigger than blockchain

Blockchain is more than a buzzword — it’s a big opportunity for accounting firms to provide services around the technology, which powers business innovations like cryptocurrency and smart contracts. Atlanta-based Top 100 Firm Aprio has been ahead of the curve, having opened a blockchain practice six years ago and, as vanguards in the space, established the firm as an early thought leader in the technology. Leading that effort are Mitchell Kopelman, partner-in-charge of the fi

How tax pros spend their summer vacations

For tax professionals, there often isn’t any real down time. Each type of business has its own rhythm, since tax businesses include everything from sole proprietorships to large accounting firms, with clientele ranging from low-income to ultra-high-net-worth taxpayers. Nevertheless, the summer is usually a good time not only to recharge one’s batteries, but to evaluate the past filing season and plan ahead for the next one — in between processing returns on extension, of cour

When ‘how’ isn’t enough

Many CPA firms struggle to scale their advisory and consulting services, yet most have an advantageous position in the market. They have many of the technical skills but do not ask themselves and their clients the right questions to stimulate creativity and inspire innovation. The gravity of the past is one of the biggest obstacles, as the toolsets and skill sets have changed from those required for transactional work. Firms create value through leadership, relationships and

The softer side of wealth management

Being a student and a business owner in the wealth management profession, it became clear to me years ago that the most successful firms or practitioners were not necessarily owned by the smartest people in the profession. In the wealth management profession, the best of the best have the entrepreneurial thing figured out. They have competent staff, powerful outside resources, capital, and a business plan to generate growth. The owner likely started as a practitioner in one o

FASB change helps banks adjust to credit loss standard

The Financial Accounting Standards Board’s proposed changes to the credit loss standard promise to help private banks and credit unions deal with the transition on a more comfortable timeline. FASB released a proposed accounting standards update this week to amend the transition requirements and scope of the credit losses standard. One of the changes involves a timing problem for when the current expected credit loss, or CECL, standard takes effect. Private banks and credit u

Tax Strategy A deep dive into Kaestner

We do not get a lot of tax cases decided by the Supreme Court, so when we get one, it is worth examining — even if it appears to be a very narrow ruling based on somewhat unusual facts. Some trusts may be able to file claims for refunds based on the recent decision in Kaestner. Others may wish to restructure their trust terms to come within the facts involved in the decision. Some states may need to review their laws to come within the guidelines of the decision. North Caroli

How far can states go after Wayfair? 'Not this far'

In the aftermath of the Supreme Court decision in Wayfair, the question that many asked was, “How far can states go in taxing entities with a tenuous connection to the state?” Now, the high court has given a partial answer in its Kaestner decision: “Not this far!” The court decided unanimously in favor of the taxpayer in North Carolina Department of Revenue v. Kimberley Rice Kaestner 1992 Family Trust, holding that North Carolina violated the Due Process Clause of the Constit

'Focus on staying current ...'

Serving middle market companies: Generally speaking, middle market companies don't have the large corporate staffs that larger companies have. It's our job to fill that gap — serving as an adviser to them, listening, and identifying their needs. Relationships are critical. With many of these companies, we deal directly with the owners, and that means balancing the needs of the owners as well as the needs of the corporation. Oftentimes, there's no easy answer, and solutions mu

Accounting standards authority receives AICPA’s highest honor

James J. Leisenring received the 2019 Gold Medal Award of Distinction, the highest honor granted by the AICPA. The award recognizes CPAs whose influence on the accounting profession has been especially notable. Leisenring was awarded for his role in developing U.S. and international accounting standards. He was appointed senior adviser to FASB in 2010 when he retired from the International Accounting Standards Board. He chaired the FASB Derivatives Implementation Group and th

A CPA’s guide to death in the internet age

By Greg LaFollette, CPA/CITP, CGMA As CPAs, we are often called upon to provide guidance in estate planning and occasionally to actually implement those plans at the time of death. We all know the drill regarding bank accounts, legal title transfers, execution of the last will and testament, trust documents, etc. But are we ready to assist in dealing with "digital death" regarding internet accounts and social media? The problem is very real and growing as more and more of us