10 Signs Your Company May Be Harboring Fraudsters

Business fraudWould you be able to spot a fraudster if you saw one? In our latest installment of Kaufman, Rossin Presents, forensics specialist Craig Hirsch, CPA, CFE, CAMS, taught business owners how to identify fraud and protect their organizations from fraudulent financial statements, theft and corruption.

Hirsch, a forensic and regulatory compliance service manager at Kaufman, Rossin, shared best practices and key findings from his team and from the Association of Certified Fraud Examiners’ (ACFE) Report to the Nations.

According to the report, in 2012 the median loss from fraud for small companies (i.e., less than 100 employees) was $147,000, which was comparable to larger companies. Consider the following median losses by size of the victim organization:

  • 100-999 employees ($150,000)
  • 1,000-9,999 employees ($100,000)
  • 10,000+ employees ($140,0000)

For smaller companies, a loss of $147,000 can have a much stronger impact than for the larger companies because of their limited size, resources, and reserves. This can be a vicious cycle for small businesses, which are particularly vulnerable to fraud because limited resources often mean fewer and less-effective anti-fraud controls.

With proper anti-fraud training, small business owners, CFOs, and controllers can learn to detect potential malfeasance by looking for various types of symptoms. Those 10 signs of possible fraud may include, but are not limited to:

  • Accounting/document symptoms
  • Analytical anomalies
  • Excessive lifestyle patterns
  • Unusual behaviors
  • Weak internal controls
  • Tips and complaints
  • Deficient tone at the top
  • Unusually close relationships
  • Insufficient fraud deterrence at the company
  • Intangible “gut feeling”

It’s important to note that any one of these symptoms in a vacuum does not necessarily indicate a fraud. However, when there are multiple symptoms present, a small business owner should consider performing a “deeper dive” to determine whether or not a reasonable explanation exists.

It is statistically proven that certain anti-fraud controls directly correlate with decreases in both the cost and duration of fraud. For example, according to the ACFE, the cost of fraud is reduced by approximately 36-45% when certain controls are in place, such as management review, employee support programs, hotlines, and fraud training for managers/executives.

The duration of fraud is reduced by approximately 53-62% when other controls are implemented, such as job rotation/mandatory vacation, rewards for whistleblowers, surprise audits, and having an official code of conduct.

Small business owners need to understand the importance of anti-fraud controls, Hirsch says, and specifically those that have statistically and historically shown the correlation between their implementation and a decrease in fraud. Many of these controls can be implemented with minimal cost and limited resources, yielding potentially high values – in dollars, reputation, and operational elements – for the organization. There is no “one-size-fits-all” when it comes to anti-fraud controls, but each organization should consider reviewing its operations for fraud risks and establishing specific and tailored anti-fraud controls.

To learn more, contact Craig Hirsch at


Lisa Cawley Ruiz is a brand journalist at Kaufman, Rossin’s Miami office. Kaufman, Rossin & Co. is one of the top CPA firms in the country. Lisa can be reached at Connect with Lisa on LinkedIn.


Create STRONG passwords that you won’t forget!

Too often we are expected to create random, complicated passwords with special characters and lots of restrictions. Especially now, with all the security breaches, we recommend the following method to help you develop passwords that are strong and easy to create and remember:

For website passwords, use the first four or five letters of the website to start the password. For example: 

Website Password amaz citi hotm


For added security, add the @ symbol and a number (1,2,3,4,5,6,7,8,9,0) to the first letters of the website. For example:

Website Password amaz@1 citi@1 hotm@1


Pick a phrase that is easy for you to remember, but that no one else will be able to attribute to you. For example:

Passphrase: “My Wife’s Birthday Is April Twenty-Fifth Nineteen Sixty Six”

Use the first letter of each phrase to form an abbreviation. For example:

m – My
w – Wife’s
b – Birthday
i – Is
a – April
t – Twenty-
f – Fifth
n – Nineteen
s – Sixty
s – Six

Abbreviated pass phrase: mwbiatfnss

Add the passphrase to the first letters of the website, the @ symbol and number. For example:

Website Password amaz@1mwbiatfnss citi@1mwbiatfnss hotm@1mwbiatfnss

Following this pattern will help you develop strong passwords that are easy to create and remember. Remember that at a minimum the passwords must:

  • contain at least 1 letter
  • contain at least 1 number or punctuation mark
  • be at least 8 characters long


Jorge Rey, CISA, CISM, CGEIT is an associate principal and the director of information security & compliance for Kaufman, Rossin & Co. Kaufman, Rossin is one of the top CPA firms in Florida. Jorge can be reached at


Another IRS email scam

The IRS will never initiate contact via email. If you receive an email claiming to be from the IRS, it is a SCAM!

Below is a screenshot of one of the scam emails being sent.

If you have any concerns or questions, feel free to contact your Kaufman, Rossin professional.


Scott F. Berger is a tax and accounting services principal at Kaufman, Rossin’s Boca Raton office.  Kaufman, Rossin & Co. is one of the top CPA firms in the country.  He can be reached at


Educating Our Students Today to Prevent Fraud Tomorrow

Did you know that it is estimated that the typical organization loses 5% of its annual revenue to fraud? Did you also know that 75-98% of college students admit to having cheated in academics compared to only 20% back in 1940? And did you know that these two variables are more than likely correlated with each other?

I recently had the pleasure of speaking to Hollywood Hills High School‘s Advanced Placement Government class taught by Larry Neuschaefe about my profession as a forensic accountant and the connection between their world and mine. More importantly, the students and I explored how cheating and plagiarizing in high school and college often leads to fraud in corporate America.

As I explained to the students, there are three components, which when combined together, increase the likelihood of fraud. In the corporate world, these three components are known as the “Fraud Triangle” and include:

  • Pressures – examples of financial pressures include mounting bills, loss of employment, or depletion of a nest egg due to poor economic conditions.
  • Rationalizations – human nature orchestrates excuses for indecent actions and behavior, allowing a person to justify their actions.
  • Opportunities – these often stem from missing or inadequate internal controls, such as the person approving check being the same individual as the one who writes it.

I proposed to the students that the elements of the Fraud Triangle – pressures, rationalizations, and opportunities – are also applicable to them as students. I also suggested that the behavior patterns they become accustomed to today may influence future behavior beyond school.

Students face pressures to score high grades, please parents’ expectations, and compete against fellow classmates to be accepted into top tier colleges. Rationalizing seems to be easy; after all, isn’t everyone doing it? And, thanks to the Internet and other electronic forms of social communication, the opportunities to plagiarize and cheat have never been greater.

If students are comfortable with this type of behavior in high school and college – during the critical formation years of their life – how will they respond to the increased pressures of corporate America and the challenges of “real life?”

In today’s society, driven by materialist values, instant gratification, and increasing financial stress, it’s critical to educate our future leaders on the importance of where their current actions may lead them. By investing the time to teach students about business and life ethics, we may be able to positively affect the future of our business environment and landscape.

Students seem willing and eager to learn about these real-world dilemmas. After receiving countless “thank you” letters from the students I spoke to, it’s apparent that students are listening, absorbing the lessons, and starting to see the dangers of cheating beyond the classroom. We can only hope that this may, in turn, reduce the number of fraudsters in tomorrow’s corporate America.

Below are just a few quotes that I received from this class.

“As teenagers, we look over “small” things such as cheating and stealing now, but we don’t really realize that our actions could lead to bad habits in the future.” – Samantha

“Craig Hirsch taught us life lessons in less than an hour just by correlating fraud in business to fraud in education.” – Aylin

“Merging the two worlds of education and real life, Mr. Hirsch provided us with a better realization of the necessity of a true education.” – Sophia

“Thank you for opening our eyes to the dangers of cheating. I think every high school student in the country should have a speaker like you come to their class.” – Emily

“Mr. Hirsch was excellent at providing a “bridge,” if you will, from his career and life to the life of high school students. He was fantastic at putting things in terms for us and did a great job of educating us about types of fraud and what leads to fraud actions.” – Sarah

“The fact that most cheaters or plagiarizers in high school and college tend to be the ones who commit frauds as adults made a lot of sense, and without Mr. Hirsch, I probably would not have made the connection. Knowing the reasons people commit fraud, in my opinion, can help young adults avoid doing so and falling victim to feeling, for example, the pressure of committing fraud.” – Vanessa


Craig Hirsch is a manager in the Forensic and Regulatory Compliance consulting practice at Kaufman, Rossin. Craig specializes in forensic accounting, anti-money laundering and counter terrorist financing, financial intelligence, corporate investigations, dispute consulting, and fraud risk assessments.  Kaufman, Rossin & Co. is one of the top CPA firms in the country. He can be reached at


Identity Theft and Tax Fraud – Are You a Victim?

Identity theft and tax fraud are serious problems that continue to increase in number and complexity as each tax season rolls by.  Don’t think you will ever be affected? Accounting Today recently reported that the IRS identified 775,723 tax returns with $4.6 billion claimed in fraudulent refunds, as of April 30, 2011. The good news – the IRS prevented the issuance of $4.4 billion (96%) of those claims which is an increase of 171% over the previous year. Unfortunately, 4% of those victims were not so lucky.

Becoming a victim of identity theft and tax fraud can cause great hardship for you and your family. The Miami Herald recently wrote about a Miami Shores family who are struggling with the IRS to obtain their $8,000 tax refund after falling victim. Indeed, my colleagues and I have witnessed many falsified returns this past tax season, and although the IRS has implemented the IRS Identity Theft Program, there is no quick and easy solution to overcome this unfortunate circumstance.

While there is no guarantee that a thief won’t steal your identity, there are certain precautions you can take to prevent becoming victimized:

  • Safeguard your personal information
  • Monitor your credit report
  • File early
  • Respond immediately to IRS notices

If you have questions about preventing identity theft and tax fraud, or if you have already been targeted and need assistance, please contact me at or 561.620.1722.

Scott F. Berger is a tax principal at Kaufman, Rossin’s Boca Raton office.  Kaufman, Rossin & Co. is one of the top CPA firms in the country.  He can be reached at