Pub. 4 2014 Issue 1

17 The dealer-owner could have further prevented the scheme mentioned by reviewing wholesale transactions that incur a loss and by personally meeting all wholesalers and vendors. An in- volved, informed dealer who sets an ethical “tone at the top” is the surest sign of a strong internal control environment. How does an audit help? External audits provide no guarantee against fraud, but it’s often helpful to have an objective, experienced outsider verify and analyze your accounting records. CPAs are trained to spot anomalies and will recommend ways to improve internal control weaknesses. Moreover, employees are less likely to commit dis- honest behavior if they know someone will be asking questions about their actions. Regular reviews Even if your dealership already has a formal internal control system in place, be sure to review it periodically. You never know when you might discover new vulnerabilities that could enable dishonest employees to steal from you.  John Comunale, CPA, is a Vice President and Director of Automotive Services at CBM. He has more than 22 years of public accounting experience, providing audit, accounting, tax and consulting services to business owners. Contact John at jcomunale@cbmcpa.com. 5 easy fraud prevention tips Talk to your employees about internal controls and let them know that you’re proactive about preventing and detecting fraud. Make it know that you: 1. Receive a copy of bank and credit card statements at your personal address. Don’t rely on the accounting department to recon- cile cash and approve charges. Duplicate their reconcilia- tions and investigate questionable items. 2. Track inventory and fixed assets. Periodically ask accounting to run an inventory or fixed asset register; then locate or test count a few items. Inaccuracies or missing items should raise a red flag. 3. Review adjusting journal entries. Normal accounting entries should accurately record financial transactions. Adjusting entries – those that correct normal accounting entries – should be rare. 4. Require annual vacations. Some diligent workers legitimately forgo a vacation, but fraudsters also need to be in the office every day to hide their improprieties. Implement a manda- tory vacation policy, to be on the safe side. 5. Have a zero tolerance policy. Terminate and prosecute em- ployees caught stealing, cooking the books or “borrow- ing” dealership assets for personal use. Exceptions set a bad precedent. 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