Forensic Accounting
Fraud Risk
Assessment
By Joe Epps,
CPA/CFF/ABV, CFE, CVA
A
lthough the economy is improving, high unemployment, depressed home values and general
uncertainty create tremendous financial stress among even trusted employees. Stress is
one of the factors that contribute to the potential for employee fraud. Even long-term and
highly-trusted employees are not immune to personal stressors, and, given the right conditions and
opportunity, may be tempted to cross the line.
The stressors may include: a relative losing a job, potential foreclosure on a home, declining home
values or continued uncertainty about the future. Management may know how they are treating
their employees, but they usually have no idea about other outside stressors that can impact even
the most honest and diligent employee. Management has a duty to protect each employee through
the implementation of a strong internal control system with defined policies. Furthermore, this
system must include a clear mission statement that is echoed throughout the organization via the
tone from the top.
There are three key types of people who commit employee fraud:
1. True Criminals – They are always looking for a way to take advantage.
2. Opportunistic Criminals –the employee who, day after day, sees an opportunity to gain
some financial advantage through theft or embezzlement at their company. Although the
opportunities have existed for years, they have never committed or seriously considered
committing a fraud against their employer. However, under stress they may act on an impulse
Joe Epps is a CPA and CFE with over 30 years
of experience in forensic accounting. His
litigation support experience includes con-
and give in to the temptation.
3. Stress Criminals – This is the employee who, under extreme stress, looks for a way to steal
property or embezzle money.
tract disputes, antitrust, economic damages,
From the company’s standpoint, catching and prosecuting the true criminals is both necessary and
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