Internal Controls from a Non-IT Perspective

Presented ByMichelle Pyan, LPI, MBA

Commercial Investigations LLC

September 22, 2011

Making Your Business Secure: What’s Enough?

His presentation

Check references and do background checks before hiring employees.• Your Employees• Your Client’s Employees

Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?

BACKGROUND INVESTIGATIONS

• Making the Case– Discourages Undesirable Applicant’s– Encourages Open Communication– Eliminates Uncertainty– Demonstrates Due Diligence– Promotes Workplace Safety– Excellent Return on Investment

BACKGROUND INVESTIGATIONSInternal Controls from a Non-IT Perspective

Making Your Business Secure: What’s Enough?

• ROI / Cost Benefit– Employee Pilferage– Commercial Bribery– Embezzlement– Vandalism– Burglary– Insurance/Workers Compensation fraud– Arson– Computer Fraud

BACKGROUND INVESTIGATIONSInternal Controls from a Non-IT Perspective

Making Your Business Secure: What’s Enough?

• Credit Reports– Determine if employee is living within their means– Deters employee fraud– Must be job related• Crucial for Payroll Handling Employees• Crucial for management or any other executive

involved in signing off on payroll documentation

Making Your Business Secure: What’s Enough?

BACKGROUND INVESTIGATIONSInternal Controls from a Non-IT Perspective

• Drug Testing– Employee Habits Such as Drug Abuse can

Induce Fraud– A Complete Background Check will Include

a Drug Test

Making Your Business Secure: What’s Enough?

BACKGROUND INVESTIGATIONSInternal Controls from a Non-IT Perspective

PAYROLL FRAUD

• Ghost Employee• False Wage Claim• False Expense

Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?

PAYROLL FRAUD

• Ghost Employee– What

Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?

PAYROLL FRAUD

• Ghost Employee– How• Add to Payroll• False Time Sheet• Issue Wage Payment• Collect the Payment

Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?

PAYROLL FRAUD• Ghost Employee– Prevent• No Cash Payments• Supervisors Approve Payroll• Add Employees Only with Approval• Performance Reviews Based on Payroll Register• Rotate Responsibility for Payroll Functions• Have Management Check the Payroll

Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?

PAYROLL FRAUD

• False Wage Claim– What

Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?

PAYROLL FRAUD

• False Wage Claim– How• Altering Time Sheets

– How are the Hours Recorded

Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?

PAYROLL FRAUD

• False Wage Claim– Prevent• Move Employees to Salary• Strict Controls on Overtime• Control the Recording of Hours Actually Worked

Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?

PAYROLL FRAUD

• False Expense– What• Mischaracterized Expenses• Inflated Expenses• False Expenses• Multiple Claims

Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?

PAYROLL FRAUD• False Expense– How• Mischaracterized Expenses• Inflated Expenses• False Expenses• Multiple Claims

Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?

PAYROLL FRAUD• False Expense– Who• Employees who are Reimbursed• Employees that Process Expense Claims

Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?

PAYROLL FRAUD• Lessons Learned– Not all Frauds Involve Employees Directly Stealing

Money or Assets– Not all Frauds Occur Once and in Large Amounts– Employees Charged with Protecting the Payroll

System are Best Placed to Defraud the System and Hide the Evidence

Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?

PAYROLL FRAUD• Anonymous Hotlines– More Frauds are Uncovered via Tips than any

other Method– Accidental Discovery is the Second Most Common

Method of Detecting Fraudulent Activity

Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?

CLIENT VETTINGDoes the company exist in state corporate records?Is the signatory a principal of the company?

Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?

• Tips– Cursory searches • White Pages• Google• Pipl• Etc. . . .

– Experian Biz Apps Reports– Third Party Site Inspection

CLIENT VETTINGInternal Controls from a Non-IT Perspective

Making Your Business Secure: What’s Enough?

CLIENT VETTING

Screen your prospects.

Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?

QUESTIONS AND ANSWERSInternal Controls from a Non-IT Perspective

Making Your Business Secure: What’s Enough?

DISCLAIMERThe information provided in this presentation does not constitute legal or accounting advise. It is for information and discussion purposes only. This presentation may not be reproduced without the written consent of the author.

Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?

THANK YOU!Michelle L. Pyan, LPI MBA

PresidentCommercial Investigations LLC

Licensed Private Investigative Agency

www.commercialinvestigationsllc.com(800) 284-0906

michellepyan@commercialinvestigationsllc.com

Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?