Embracing a Fraud: How to make it Happen

by Eric Smith

Last month, the Journal of Accountancy published an article that has placed the accounting world into a palpable buzz not seen since the days of the nine-key becoming the ten-key. The article, “Fraud: Pshhh Whatever,” is the product of several years of work by secret AICPA operatives, Kojo William Wood and David Newton. Already proclaimed and endorsed by members of the Securities and Exchange Commission and the Center for Audit Quality as a “transformative look at the future of laissez-faire internal controls”, the article brings to light some helpful tips and tricks that can help both for-profit and non-profit businesses alike.

Wood and Newton’s manifesto provides over 2,500 pages of must read, eye-popping material. However, for your courtesy and my sanity, I have selected some of the most beneficial and groundbreaking findings included in the article.

  • Segregation of Duties is Un-American – Nothing else in society is segregated these days, so why should your duties be? By allowing more freedom and placing unwavering trust in all employees, everyone can achieve greater personal and financial growth. Each employee should have their own personal company checkbook and oversight should be non-existent, which follows the example set forth by both the IRS and the SEC. In the article, one employee explains how much more productive he is now with less controls in place, “Since my Controller gave me my own company checkbook, my house is paid off, I’m driving a new BMW, and I can even afford to eat lobster each night!”
  • Limits Only Hold You Back – It is crucial that all company credit cards are free of credit limits. This follows the old proverb, “You have to spend money to make money,” only changing it slightly to “You have to go miles to earn miles.” Many companies today take advantage of the rewards that are associated with their credit cards, but are not reaping the full potential of these rewards due to pesky “oversight.” Bi-monthly trips to places like Bora Bora and Kathmandu, add both miles to your credit card and smiles to your employees’ faces. Occasional “accidental” personal purchases are also now encouraged.
  • Getting the Right People on Your Board – According to the article, 50% of all board members join boards to spend less time with their kids, 30% join to spend less time with their spouse, and the other 20% got lost and just found the first room with people in it. Make sure your board is comprised of the people who truly care, your employees! By having your board comprised entirely of employees, you can have board meetings whenever you want since they already know what’s going on with the day-to-day, so there’s no need for any additional oversight.
  • Don’t Sign Anything – Most fraud is discovered through an abstract term called “evidence”, so in theory if there is no evidence there will be no fraud. Key steps to facilitate this include having all correspondence prepared in invisible ink and sent by carrier pigeon, only issuing blank checks, and only paying employees in rolls of 1975 pennies. Each of these are guaranteed to keep your hands clean, except the 1975 pennies, there was a weird copper used that turns your fingers purple.

Though implementation of these new policies and procedures may take some time for employees to get used to, Wood and Newton found that once in place it was almost impossible for the companies to go back to their old controls. Make sure to implement these changes in your company or organization today for the best results.