How to Prevent Fraud as an Auditor

"We need more data to catch fraud" is usually wrong. You need better questions. I once inherited a fraud team drowning in data: • 100+ insights per transaction • 6 different risk tools • Terabytes of historical data Their chargeback rate was 1.5%+ Six months later, with the same data but different questions, we hit 0.6%. Instead of asking "Is this transaction fraudulent?" We asked "Why would a fraudster choose us?" That revealed a lot.... • We had instant payouts (fraudster candy) • Our refund process was automated (easy to exploit) • New account benefits were stackable (hello, farming) The framework that cut fraud 75%: 1. Map your honeypots    What makes your business attractive to fraud?    List your top 10 fraudster benefits.     2. Price the exploit    Calculate the ROI for each attack vector.    Fraudsters are ROI-driven. Make their math not work.     3. Break the economics    Don't block the fraud. Make it unprofitable.    Add delays. Require deposits. Limit stacking. Example: We had fraudsters creating 50+ accounts for new user promos. Instead of better detection, we made promo codes single-use per payment method. Simple. But effective. Fraud farms started to disappear. You already have the data. You're just asking it the wrong questions. BD²¹

Fraud grows unchecked without anyone noticing? That's exactly what happened to one of my clients. Because his businesses basic internal controls were non-existent, allowing a single employee to process payments, reconcile accounts, and destroy evidence without oversight. Then we helped him, here’s how: 1️⃣ Segregation of Duties – Strategically divide financial responsibilities so no single person controls multiple critical functions, creating natural checks and balances that make fraud exponentially more difficult. 2️⃣ Authorization Hierarchy – Establish clear approval thresholds and verification protocols for transactions, ensuring appropriate scrutiny based on risk and materiality. 3️⃣ Documentation Standards – Implement rigorous record-keeping requirements that create audit trails for every significant transaction, eliminating gaps where impropriety can hide. 4️⃣ Independent Reconciliation – Deploy regular account reconciliations performed by someone other than the transaction processor, catching discrepancies before they become systemic problems. 5️⃣ Periodic Internal Audits – Conduct surprise reviews of financial processes and transactions, creating accountability and deterrence through unpredictable oversight. The results?  ✅ Fraud risk reduced by 94%  ✅ Operational errors decreased by 76%  ✅ Stakeholder confidence strengthened Later, the business owner confessed: "I trusted completely and verified never. I didn't realize that internal controls aren't about suspicion, they're about creating systems that protect everyone, including honest employees." Strong internal controls make fraud difficult and detection inevitable. Weak controls create temptation and opportunity. I help businesses implement effective internal controls without bureaucratic complexity. DM "Controls" to safeguard your financial future. #internalcontrols  #finance  #accounting 

From Auditor to CEO: A New Perspective on Audit Value You know what's funny? I used to be that auditor who rushed through certain procedures thinking "this is such a waste of time." Now that I'm sitting in the CEO chair, I'm having a major "aha" moment about how valuable these audit steps really are. Let me share some real talk about where I'd love to see auditors dig deeper: ✏️Internal Controls & Segregation of Duties: As CEO I can't be everywhere at once. I need to know if someone has more system access than they should, or if we've got gaps in our controls. Don't just check the box - tell me where we're exposed and how we can fix it. ✏️Fraud Conversations: Talk to more people. Ask the tough questions. Has anyone felt pressure to bypass controls? To record something that didn't feel right? These conversations matter more than you might think. ✏️Year-End Journal Entries: Sometimes we need those top-side adjustments. But if we're only catching things at year-end, we might have a process problem. Help me understand if we need to rethink how we're tracking things throughout the year. ✏️Concentration Risks: Running a business is like drinking from a firehose - sometimes I forget to step back and look at the big picture. Flag those customer or vendor concentrations for me. I need to know if we're putting too many eggs in one basket. ✏️The Little Transactions: While high-dollar transactions deserve scrutiny, control breakdowns often happen in smaller, under-the-radar transactions. A balanced testing approach across transaction sizes provide a lot of value. Here's the bottom line: skip the fluff and generic recommendations. Give me insights that actually help me sleep better at night knowing my business is more secure and efficient. #RealTalk #Leadership #Audit #BusinessInsights #CEOLife