Uncovering fraud via tech

Culture and process are keys to fraud prevention at organizations, but it’s important to build technology on top of those building blocks.

Presenting “Using Technology to Unravel Financial Statement Fraud” during the AICPA Not-for-Profit Industry Conference in Washington, D.C., earlier this year, Brian Fox, president and founder of Confirmation.com in Nashville, Tenn., said just as technology is used to create fraudulent confirmation processes such as fake mailing addresses or websites, technology also could be used to uncover fraud.

A CPA and founder of confirmation.com, Fox, also an adjunct professor at Vanderbilt University, said nonprofits should consider three things about electronic confirmations:

  • Is it secure?
  • Is the entity legitimate?
  • Are they authorized?

“If we hope to reduce the occurrence of fraud, then we have to increase the likelihood of detection, and technology can give us that advantage,” Fox said. “Technology can play a significant role in deterring those who might behave unethically. The real deterrent is the threat of being caught,” he said.

Culture can help prevent fraud, including company values; board governance practices; company tone among executive management; business ethics in employee relations; ethics in business strategy and operations, i.e., customers, vendors, suppliers, partners, etc. Then there are things that organizations can do on the process side, such as establish policies and procedures; document and communicate to all stakeholders; develop internal controls; create reporting procedures; develop an investigative process, and corrective action.