Act Now Before It Is Too Late

It is only a matter of time before you

are defrauded!

Take Proactive Steps Before Your Business is Defrauded“Nearly half of all victim organizations do not recover any losses that they suffer due to fraud” according to the 2012 Report to the Nations presented by the Association of Certified Fraud Examiners. Although, there are no statistics that report the total number of entities and the amount defrauded, regardless of size, any organization can become a victim of fraud.When fraud occurs in an organization, management is often unprepared. In fact, when fraud is discov-ered, management is frequently in a state of shock, dealing with the emotional pain of the fraud, and

as a result is unable to focus on ongoing business operations. Fraud can devastate an organization through the loss of assets, time, effort and the cost required to investigate the loss. Additional setbacks include: low morale; decreased productivity within the organization; negative publicity; and adverse reac-tions from stakeholders, investors, sponsors or reg-ulatory agencies. Taking proactive steps before your business is defrauded is critical to minimize fraud. The following steps will help your management team reduce its susceptibility to fraud.

uPerform Background Checks When Hiring EmployeesFactors to consider in performing background checks include: • Education and Employment Verification;• Criminal, civil and credit checks;• Drug Screening; • Reference checks; and • Public data searches (e.g. Facebook, LinkedIn, Google).Also, employers should maintain the right to perform ongoing credit checks through employee consent.

vObtain Insurance Coverage Before a Loss OccursAfter the discovery of a fraud is when an organization reviews the provisions of their insurance policies. Frequently organizations find out the coverage is not sufficient to cover the loss. It is also important to include professional fees to assist in the investigation of the fraud in the coverage. Often lawyers and forensic accountants are required to investigate and assist in recovering funds. Depending on the longevity and the amount of the fraud, these necessary expenses can be costly. Policies will often require that you notify the appropriate law enforcement authorities in order to recover on a claim.

wTrust But VerifyMany basic frauds can be detected early by a review of the actual transac-tions. Review actual invoices, credit card statements, and cancelled checks or the bank provided image. Oftentimes, a fraud is later determined to have been very obvious to detect if someone had only reviewed the supporting documentation.

© 2013 Smart, Devine & Company, LLC. All rights reserved.

smartdevine.com 267-670-7300

Every dollar counts

“Nearly half of all victim

organizations do not recover

any losses that they suffer due

to fraud” according to the 2012

Report to the Nations - Association

of Certified Fraud Examiners.”

xDon’t Ignore Red FlagsOften times, there are obvious signs of distress or a lifestyle change with an em-ployee. If so, look a little closer at the employee’s behavior and what access the employee has to entity assets. An obvious discrepancy between an employee’s earnings and their lifestyle is a red flag. A change in behavior by an employee can be an indication they are under severe stress due to their fraud. Once a fraud has been detected, the amount of red flags that were obvious can be astounding. Management needs to remain objective in its observations of employees. Often, red flags are identified in an employee’s behavior, but management fails to heed the signs. A Fraud Hotline, Whistleblower Policy, and a Management Open Door Policy can help maintain management objectivity and give employees a way to report fraud.

yProsecute to The Fullest Extent of The LawSome victims choose not to prosecute a perpetrator in connection with a fraud. This may be done because of misplaced compassion for the perpetrator and/or avoidance of negative publicity and potential counter claims. These entities set themselves up to be repeatedly defrauded. An effective way to avoid your next fraud is to fully prosecute your current fraud. You must make a strong statement and example of how your entity will treat fraud when they become a victim of it. If you terminate an employee for fraud and follow through on having them prosecuted subject to all the publicity that may come with it, you may be able to avoid that next fraud from occurring.

© 2013 Smart, Devine & Company, LLC. All rights reserved.

smartdevine.com 267-670-7300

A c c o u n t i n g T a x A d v i s o r y

Kyle Anne MidKiff And SMART deVine CAn Help youKyle Anne Midkiff, CPA, CFE, CFF, has over 25 years of experience in Forensic Accounting. Kyle is a Managing Director in Smart Devine’s Forensic and Litigation Services Practice. For more information, please contact Kyle at 267.670.7341 or kmidkiff@smartdevine.com

Kyle Anne Midkiff, CPA, CFE, CFF Managing director

Kyle has over 25 years of forensic accounting and litiga-tion services. Her experience includes evaluation of economic losses, internal investigations, financial investigations to pierce the corporate veil, whistleblower investigations, and evaluation of compliance with professional accounting standards. Kyle has testified numerous times as an expert witness in Federal and State Courts. Additionally, she has published various articles on Fraud and frequently lectures on Fraud and Fraud Prevention and Detection.

Smart Devine provides a full range of accounting, advisory, tax, forensic and litigation services to organizations across a variety of industries. For more information about our services call 267-670-7300 or visit our website at smartdevine.com.

In addition to the services listed above, Smart Devine offers a full line of solutions including:

Our practice areas include:

n Litigation ServicesBankruptcyCommercial Damages/Lost ProfitsContract DisputesPartnership/Shareholder ActionsProfessional LiabilitySecurities LitigationPersonal Injury/Wrongful Death

n Environmental LitigationPast Costs InvestigationsOversight ClaimsAbility to PayInsurance Coverage DisputesVolumetric AllocationsCost Recovery Litigation

n Trustee & Monitoring ServicesReceiverships/MasterCustodial ServicesBankruptcy Examiner

n Forensic InvestigationsFraud InvestigationsInternal InvestigationsDue Diligence InvestigationsCorporate Veil Piercing ClaimsFinancial Statement FraudsWhite Collar CrimeTax Controversies

n Digital Forensics & eDiscoveryAcquisition & Preservation of Digital EvidenceComputer & Network ForensicsInternet/E-mail InvestigationsData Recovery & AnalysisData MiningElectronic Document Collection/DeduplicationEarly Case AssessmentDocument Production/Bates Stamping

Accounting & AuditTaxBusiness Advisory• Financial Advisory• Management Consulting Services• Technology Consulting Services

Insurance Advisory Services• Accounting• Reviews • Claims Services • Underwriting/Premium • Forensic Accounting

Smart Devine | 1600 Market Street | 32nd Floor | Philadelphia, PA 19103 | T 267-670-7300 | info@smartdevine.com© 2013 Smart, Devine & Company, LLC. All rights reserved.