Fraud Lurks: Looking At The BossThis month represents the one year mark of my penning Fraud Lurks articles for our Fraud and Forensic Newsletter.  The first, “Fraud Lurks: in your Cancelled Checks” received the most fanfare, having been published several times, including the OSCPA Voice and even the Cleveland Jewish News.

I try to keep my writing light and readable; I don’t feel the need to try to impress with terms and acronyms you need to research.  My goal is to have you read the article and, hopefully, apply some or all of it to your business.

This month I feel the need to get a little technical.  If you have been reading, you know the best way to avoid fraud – or at the very least – to catch it quickly, is with a strong system of internal controls.   I know that term turns people off because of the aforementioned terminology and acronyms, but that need not be the case.  Internal control has five elements:

Control Environment

Risk Assessment

Control Activities

Information and Communication


In my June 30, 2021 article, I discussed Risk Assessment – go back and reread that one as I believe it is the most important.  Also, it is the element which, if done correctly, results in an effective and efficient system of internal controls.  Last month’s article focused on Monitoring. This month we will go back to the top, literally and figuratively.

The control environment is quite simply, the tone that the owners and top management set relative to their business.  When I speak to business owners and top management at OSCPA or other conferences, I like to explain the Control environment in these terms:

Your employees follow your lead.  They will tend to act like you, talk like you, dress like you and…steal like you.

Obviously, I’m trying to get their attention.

The fact is, ownership and top management are responsible for the foundation of the business:

  • Making a commitment to quality, both in the product or service you provide and in the manner in which it is done
  • Establishing a system of review and oversight
  • Structuring responsibility
  • Enforcing accountability

Much in the same way children follow their parents’ and teachers’ actions, not words, your employees will notice and follow your actions.  You cannot expect adherence to the control procedures you have instituted if you are known to override those controls when it suits you.

This doesn’t mean work must be formal and uninteresting.  Many very successful companies have developed a less formal, more fun environment; this aids with employee satisfaction and retention.  But the controls, the controls must be adhered to, by your people and by you.  That is your responsibility as owners and top management.  I suggest you step back and evaluate the Control Environment you have established.

As always, feel free to reach out to me or your HW&Co account executives with questions or comments.

Stanley Olejarski