Fall 2015 Issue of Horizons

Know the Signs It can be just as important to understand the profile of a fraudster as it is to know the typical fraud schemes. Per the ACFE, fraud typically is not perpetrated by a repeat offender. In fact, only 5% of fraudsters had been previously convicted of a fraud-related offense prior to committing the crimes examined in the ACFE study. Additionally, 82% of fraudsters had never been punished or terminated by an employer for fraud-related conduct. This shows that while background checks are useful in screening out some bad applicants, they might not be effective in predicting fraudulent behavior. The ACFE report shows that most fraudsters have been employed for more than one year before committing fraud, so understanding risk factors and warning signs of fraud are more likely to identify fraud than pre-employment screening. For example, most fraudsters display some warning signs, such as living beyond their means, financial difficulties or having unusually close associations with vendors or customers.

In 92% of the cases reviewed in the ACFE report, at least one warning sign was present prior to the fraud. Training for employees, management and auditors to recognize these warning signs is important to help detect fraudulent behavior. Protect Your Company’s Reputation Ultimately, knowing the types of fraud, what controls to implement and the profile of a fraudster can help mitigate the chances of a significant fraud loss, but there is another benefit to having a strong corporate culture focused on ethical behavior: reputation. Reputation is a construction company’s most important asset since the industry is small enough for word of mouth to carry great weight in the decision process of sureties, bankers, suppliers or customers. Whether it is the presentation of their financial statements, interactions with suppliers or the day-to-day actions of their employees, companies should operate under a code of ethics that builds their reputation in the community.

RubinBrown’s Construction Services Group We provide services to general contractors, specialty subcontractors and related companies in the construction industry.

Ken Van Bree, CPA, CGMA — St. Louis Partner-In-Charge Construction Services Group 314.290.3429 ken.van.bree@rubinbrown.com

Mark Jansen, CPA, CGMA — St. Louis Partner & Vice Chair Construction Services Group 314.290.3208 mark.jansen@rubinbrown.com

Matt Beerbower, CPA — Denver Partner & Vice Chair Construction Services Group 303.952.1252 matt.beerbower@rubinbrown.com

www.RubinBrown.com | page 41