Ever wonder if your employees are deceiving you? Occupational fraud statistics for the average business, put out every other year by the Association of Certified Fraud Examiners, would show that the answer is yes, some of your employees are probably attempting to deceive the company in some way. So how do you know which employees could be involved in a fraud scheme? In “The 10 Tell-Tale Signs of Deception” published in the January issue of Fraud Magazine, Paul M. Clikeman, PH.D., CFE gives some techniques to help Certified Fraud Examiners in their fraud investigations, but these same signs of deception could also serve as red flags when demonstrated by your employees.
Here is a summary of the Ten Signs of Deception that business owners should keep in the back of their minds when working with employees, especially those with access to financial data or who approve or pay invoices:
- Lack of self-reference. Deceptive people often use the passive voice when describing events:
- “The key was signed out” instead of “I signed out the key.”
- “The door was unlocked.” Instead of “I unlocked the door.”
- Verb Tense. When telling the story of what happened, deceptive people sometimes describe the actual past event as happening in the present:
- I locked the door to the office. As I walked away, a person hits me and grabs the money and runs away. I looked around, but did not see anyone.
- Answering questions with questions. Deceptive people prefer not to lie, and will try to avoid lying by asking a question instead of answering directly:
- “Why would I steal from my boss?”
- Equivocation. Statements are filled with expressions of uncertainty, weak modifiers and vague expressions such as: think, guess, maybe. Nothing seems to be definite.
- Oaths. Often use oaths to convince others that what they say is true, instead of offering up the simple truth:
- “I swear”
- “Cross my heart”
- Euphemisms. Deceptive people often use euphemisms to make their behavior appear more favorable:
- Use the word “missing” for “stolen”
- Replace the word “threatened” with “warned”
- Alluding to actions. People sometimes allude to doing something, but may not actually do it. Don’t assume that the action was performed just because they allude to it. For example:
- I started to lock the door, when I realized that I needed to also lock the safe.
- Lack of Detail. Be wary of those statements that do not contain a lot of details. Truthful statements usually contain specific details, like the color of the counter or the type of music playing. Deceptive people don’t want to run the risk of someone using details to check out their story.
- Narrative balance. A narrative has three parts: prologue, critical event and aftermath. In a narrative, 20-25 percent will be prologue, 40-60 percent critical event and 25-35 percent aftermath. If any of these parts is longer than expected, it may contain false information.
- Mean Length of Utterance. The average number of words per sentence is called the “mean length of utterance” (MLU). The MLU equals the total number of words in a statement divided by the number of sentences. The average number of works per sentence is 10 to 15. Sentences much shorter or much longer are red flags.
If you are investigating an employee that you suspect is being deceptive, look for these signs. People often reveal more then they think in the words that they choose. If you suspect a fraud scheme in your company, contact a Certified Fraud Examiner to conduct a fraud investigation.
Tricia J. Cook is a senior forensic analyst with the forensic accounting and litigation services department at Piercy Bowler Taylor & Kern CPAs. She sifts through financial transactions to resolve allegations or evaluate suspicions, interpreting that transactional data and then organizing that information into easy to understand reports for use by counsel, or for presentation in a court-of-law. She can be reached at firstname.lastname@example.org or 702-384-1120.