IS FRAUD ABOUT GOOD AND BAD PEOPLE — OR PRESSURE AND OPPORTUNITY? By Paula Mashburn, CPA, CFE Partner, HHM CPAs, Dealership Specialist If you’ve worked in a dealership for any length of time — especially if you’re responsible for the bookkeeping — you’ve probably heard these famous last words: “I never would have expected that from him.” “She seemed like the most honest person here.” After two decades in this industry, both from inside dealerships and as a CPA and certified fraud examiner specializing in auto retail, I’ve seen internal fraud play out far too often. And it almost always catches everyone by surprise. Why? Because fraud isn’t just about “bad” people. It’s about circumstances — the perfect storm of pressure, rationalization and opportunity. THE FRAUD TRIANGLE: WHERE FRAUD REALLY STARTS Let’s look at the classic Fraud Triangle. This way of thinking about fraud says it takes three things to make an honest person do something dishonest: 1. Pressure: A need, want or crisis. Maybe their child is sick, and they can’t afford medicine. 2. Rationalization: The mental game that makes it seem “OK.” “They don’t pay me enough — so it’s only fair.” Or my personal favorite, “Other honest people would do the same thing if they were in my situation.” 3. Opportunity: This is the real difference maker, and it’s on us as business owners and managers. It’s the environment that allows someone to take cash or assets, and it goes undetected. This could be weak internal controls, a lack of oversight or one person controlling the books with no checks and balances. I’ve learned that pressure can make good people do things they would never “normally” consider. Rationalization gives them a reason. But fraud can’t happen unless they see opportunity. Take this to heart: A tremendous amount of internal dealership fraud goes unreported, and you never hear about it unless it’s through the grapevine. Most people who have stolen from a dealership weren’t “bad” people. Even those who have taken millions were trusted employees, even admired, by their co-workers. That’s why it hurts — and shocks — when the truth comes out. GOOD PEOPLE, BAD MOMENTS Let’s get real. Imagine a loyal employee whose child is incredibly sick. Medical bills are piling up, and there’s no help in sight. 19 Arkansas Auto Dealer
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