It is not difficult to find stories to read about business process and internal control failures happening all around us … in entities of all types and sizes.

And doesn’t every case of failure start and end with people?

The answer to that is clearly “yes.”

more

As the second quarter “earnings season” has played out over the last several weeks, I think it is fair to say that more often than not “numbers” were made despite drops in revenue. The explanation for this is again, more often than not, that the company has “cut costs.” Does this mean there are no more costs to cut? Does it mean the job was done well and all organizations are now better cost managers? Experience tells us the answer to both questions is “probably not.” more

Difficult economic times can be the breeding ground for increased fraudulent activities. In July 2009, the Financial Crimes Enforcement Network (www.fincen.gov) published its 12th edition of The SAR Activity Review — By the Numbers. SARs (Suspicious Activity Reports) are one key aspect of FinCEN’s efforts related to its responsibility for regulatory administration of the Bank Secrecy Act of 1970. Many different financial industries such as banks, credit unions, insurance companies, check-cashing services, broker/dealers, and casinos are required to complete and file SARs. more

Two recent and seemingly unrelated articles intrigued me. One is titled “Detroitosaurus Wrecks” and appeared in the June 6 issue of The Economist. The other was “Fraud Triangle Analytics,” in the July/August issue of Fraud Magazine. How do these two tie together? more

Aaron Beam, former CFO of HealthSouth Corp., is interviewed in June’s CFO magazine in an article titled “I Should Have Said No.” Mr. Beam pleaded guilty to criminal charges regarding his participation in that $2.7 billion fraud. When asked “How did the fraud begin?,” Mr. Beam responded “… We committed fraud in the summer of ‘96, when we could no longer change estimates to make earnings. We thought we could make a lot of entries small enough that the auditors wouldn’t detect them. So one night, during the second quarter of ‘96, I said, ‘OK, let’s do it,’ and we credited revenue that did not exist and we debited assets that did not exist.”

The flight path was set … and it was set to fly “under the radar”! more