SMBs - Why You Need a Certified Fraud Examiner (CFE) and a Fraud Risk Management Program

Fraud Risk

Fraud Risk

I love telling people what my career passion is.

“You’re a Certified FROG Examiner?” 

No, FRAUD Examiner.  Big difference.  I wouldn’t know the first thing about frogs.  Fraud, however, is a different story.

“What’s a Fraud Examiner?”

The Association of Certified Fraud Examiners tells us on its website that a CFE is an expert in fraud prevention, detection and deterrence.  “CFEs,” it says, “are trained to identify the warning signs and red flags that indicate evidence of fraud and fraud risk.”

“Never heard of it.” 

That’s OK. I get that a lot.

The ACFE was established in 1988 by Joseph T. Wells, accountant-turned FBI agent. It has grown to nearly 85,000 members world-wide and is the largest anti-fraud organization and fraud education/training source in the world.

The CFE has a skill set setting it apart from other professionals such as CPAs. Like CPAs, they must pass a rigorous test, but the CFE test combines four unique disciplines:

  • Fraud Prevention and Deterrence

  • Financial Transactions and Fraud Schemes

  • Investigation

  • Law

This unique focus has become my niche.

“That must be for really big companies.”

Yes and no.

We’ve all heard about the big corporate frauds.  Forbes listed the Top 10 Biggest Frauds in Recent US History.  On that list are Enron. Lehman Brothers. WorldCom. Fannie Mae. HealthSouth. Tyco.

Municipalities and even small towns were everyone knows each other can fall victim to fraud.  Have you seen the 2017 documentary “All the Queen’s Horses”?  It tells the story of how the city comptroller embezzled $53 million dollars from the small town of Dixon, Illinois, over a period of 20 years.  How is that even possible?  She was an employee in a small office with insufficient internal controls, and no one questioned her because she was highly trusted by the mayor of the town.  

By the way, coming in at #2 on that Forbes list was Bernard Madoff, the brilliant Ponzi scheme architect and destroyer of lives.  He, too, was a well-trusted friend and family member, but Madoff had no qualms about making off with their money either.  Don’t get me started.

Sadly in fraud cases, it’s often the most trusted individual in the organization that is in the best position to commit fraud.

“Well, my small business is safe.”

I sincerely hope so. 

The ACFE puts out an annual report to present its analysis of occupational fraud cases.  In its 2018 Report to the Nations, its study considered 2,690 cases investigated by participating CFEs between January 2016 and October 2017.  The Association admits its data is imperfect.  Data only includes information from reporting CFEs and excludes undetected or unreported fraud. 

With those limitations in mind, here are a few of its findings:

  • 42% of reported cases involved privately held companies

  • 29% involved publicly traded companies

  • 28% of defrauded companies have <100 employees

  • 22% have 100 – 999 employees

  • The Average Loss suffered by these defrauded companies was an average of 5% of their annual revenue

I ask you, Small Business Owner, what is 5% of your annual revenue?  Is that an acceptable risk of doing business?

Unfortunately, small companies are especially vulnerable for a few reasons.  Mainly, small business owners think they don’t have the resources to put proper controls into place.  The 2018 Report discovered that of the companies with <100 employees, 42% of those frauds resulted from lack of internal controls, and 29% are perpetrated by an owner/executive, such as a highly trusted employee.

“That’s just great.  What am I supposed to do now?”

Don’t panic, but move forward in finding a solution.  Let me help you.  I’m a CFE with the special training to evaluate fraud risk.  

My core services include:

  • Personalized Risk Assessment Evaluation.  I will outline your level of fraud risk at the process-level so you can see the exactly where there are opportunities for loss.

  • Evaluation Report and Recommended Solutions.  I will clearly illustrate the Evaluation results and offer step-by-step suggestions to improve internal controls.

Additional services include:

  • Implementation Assistance Some of my recommendations will be changes you can manage on your own.  Some may require coordination with your staff to put in place.  I can educate and work with your employees to get you up and running. 

  • Annual Fraud Prevention Check Up.  How did you do with the implementation?  That’s what we’ll find out during your Check Up.  I will perform another Fraud Risk Evaluation with another Evaluation Report and Recommendations. 

Contact Linda at lindaaccttax@yahoo.com to schedule an initial call through January 31st and get a discount code for 25% off of the Fraud Risk Assessment.

Would you like to hear more detail about a Fraud Risk Management Program? Listen to the Putting the AP in hAPpy Podcast Episode 13: SMBs – What a Fraud Risk Management Program Can Look Like For You.


Linda Stacey, CFE, Guest Blogger

Linda Stacey, CFE, Guest Blogger

Linda has over 20 years’ experience in general ledger accounting, accounts payable, accounts receivable and cash management with a focus on small and medium-sized companies.  

Linda has a Master’s Degree in Accounting and is a Certified Fraud Examiner. 

Connect with Linda on LinkedIn

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Linda Stacey

Linda has over 20 years’ experience in general ledger accounting, accounts payable, accounts receivable and cash management with a focus on small and medium-sized companies. She has seen first-hand the challenges small business owners have in protecting themselves from fraud – from external threats as well as threats from within their own organizations.

Her calling as a Certified Fraud Examiner (CFE) stems from wanting to guide business owners through the process of protecting their business assets from unnecessary loss from fraud. Her common-sense approach to internal controls is meant to give business owners cost-effective peace of mind.

Linda has a Master’s Degree in Accounting and is a Certified Fraud Examiner. She adds this specialty to her menu of services and looks forward to providing her unique perspective to her clients as they evaluate their business processes.

She has lived in the Tulsa area for over 25 years.