Part One: HR Interview Tips from a Fraud Examiners Perspective

HR professionals conduct interviews with many people for a variety of reasons, whether hiring employees and vendors, conducting exit interviews or following up on an internal complaint.  It is important for them to be aware of common deceptive behaviors and how to identify them in their fellow employees.

By asking some non-sensitive questions, you can observe a person’s verbal and nonverbal behavior and use it as a gauge to help determine if further investigation may be needed.  If these behaviors change during the course of your interview, then there may be a cause for concern.

Certified Fraud Examiners (CFEs) use these verbal clues to identify possible deception within a company they are investigating.  These same hints can help an HR person hire the right person and take a pass on the potential problem employees:

  • Speech Pattern Changes. Change in speed of speech or voice pitch, coughing or clearing throat.
  • Repeat Questions. Asking the same question over and over again in the interview, or always asking for clarification.
  • Interview Environment Questions. Comments regarding the physical environment of the interview or frequent questions about length of interview.
  • Selective Memory. Claim to be unable to remember important or significant events or information.
  • Excuses. Making excuses about things that make them look bad.
  • Certain Words Emphasized.  Emphasizing certain words to make them appear more credible.

If there are signs of deception during an interview, what should you do next? At what stage is a fraud professional needed in the investigation and how would you go about hiring one? It may be earlier than you think.

In the next article in our series on the topic of how HR professionals and CFEs can work together, we will offer suggestions for how to investigate possible fraud without alerting the suspected employee in order to gather information in a timely and effective manner.

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Top Ten Most Corrupt States in the U.S.

Risk Management Monitor (By Hillary Tuttle): A new study from researchers at Indiana University and City University of Hong Kong on the most and least corrupt states in America calculates that government corruption costs American taxpayers tens of billions of dollars a year. In the 10 most corrupt states, for example, simply reducing corruption to an average level would lower annual state spending by $1,308 per person, or 5.2 percent of state expenditures.

In “The Impact of Public Officials’ Corruption on the Size and Allocation of U.S. State Spending,” Cheol Liu, assistant professor in the Department of Public Policy at City University of Hong Kong, and John Mikesell, Chancellor’s Professor in the School of Public and Environmental Affairs at Indiana University Bloomington, found that corruption is directly linked to excessive state spending, and noted that corrupt states particularly spend more on construction and capital projects and less on services, including education.

The researchers used data from more than 25,000 convictions for violations of federal anti-corruption laws between 1976 and 2008 to create a “corruption index,” then compared convictions with the number of government employees. This method, they explained, avoids the issue of state differences in police, prosecution and court resources, making the results a reflection of the extent of corruption, not of law enforcement effort. Defining corruption as the “misuse of public office for private gain,” the authors found that public and private corruption can have a range of negative effects, including lower-quality work, reduced economic productivity and higher levels of income inequality and poverty.

According to the study, the top 10 most corrupt states are:

Continue reading at: Risk Management Monitor

Five Ways to Avert Employee Theft and Fraud

From Entrepreneur Magazine (Contributor Keith Mueller): Whether it’s divulging a company’s intellectual property to another party, forging fraudulent checks  or stealing merchandise right off the shelves, employee theft and fraud are among the most serious threats to the success of businesses today.

The 2014 Global Fraud Study released in May by the Association of Certified Fraud Examiners determined businesses can lose on average 5 percent of revenue each year to fraud, pegged at nearly $3.7 trillion across the globe. The study also reports that more than 1 in 5 of the nearly 1,500 cases analyzed in more than 100 countries had employees walking out the door with at least $1 million in cash.

Lack of employee trust and job satisfaction coupled with careless hiring and supervision can — and has — led to vulnerable businesses that are ripe for internal theft and fraud.

Implementing internal and external controls and systems, as described below, can help a company reduce the risk of theft and hopefully catch any would-be rogue employees.

1. Conduct pre-employment background checks.

A strong hiring process is critical to the health and longevity of a business in more ways than one may think. Business owners must do due diligence when hiring a new employee, arranging for background checks and contacting references. This will help weed out a lot of the potential rogue employees from the outset.

Continue reading at Entrepreneur.

Bill Nelson Talks Fraud in the Workplace (Las Vegas Real Estate Now Radio)

The radio show Las Vegas Real Estate Now recently featured Bill Nelson, CPA and Shareholder with Piercy Bowler Taylor & Kern. Bill shared a wealth of knowledge about fraud and emphasized how prevalent fraud is in today’s world and that while the dishonest will remain dishonest, the goal with his clients is to protect them and help keep the honest people, honest.

One of the important things that Bill pointed out for business owners is to carefully track cash both on hand in the bank through the use of reconciliations. He also suggested that retail establishments use cash registers that provide receipts for every sale and can also be reconciled with the internal mechanisms tracking the transactions.

An important component to the CPA services is to audit and evaluate the books of any business and owner employing those services. In fact, it’s a requirement of the standards of practice that Bill and his firm audit and test the controls. Bill pointed out that owners become comfortable with their employees and sometimes the last person you would expect to commit fraud surprises you. Bill cited one of his first cases of fraud where the employee who was viewed by the owners as the grandmotherly type, was well loved and frequently baked them cookies actually stole over $100,000! Talk about expensive cookies!!

Bill also shared that based on an international study, the median fraud is $145,000. This money is easily hidden and typically taken over time. Bill talked about how the fraud usually starts with the mentality of  ”I’m just going to borrow a few dollars. I just need this cash this weekend. I’ll pay it back on Monday” but then Monday rolls around and they don’t have the money and no one really noticed so some the end of the week, they take a little more.

The bottom line is that fraud can happen to any owner and any business regardless of who your employees are or how long they’ve worked for you and every business owner should had the checks and balances in place to protect themselves.

Watch part of the radio segment and learn more at http://www.brownblankfeld.com/bill-nelson-talks-fraud-workplace/