Best Practices to Combat Fraudulent Tax Activity

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With less than three weeks to the filing deadline, your clients might be scrambling to furnish all of their receipts and documents of transactions for their tax returns. But you might come across items that are suspicious and could even be fraudulent.

AccountingWEB presented some questions to Randy Wilson, a senior manager in the Chicago office of Cendrowski Corporate Advisors, on what accountants can do to protect themselves and their firms. He offered some tips on how firms could question suspicious issues and what steps to take to ensure best practices in combating fraudulent activity. Randy has more than two decades of experience in internal corporate and government investigations, fraud analyses, embezzlement detection and prevention, risk management analysis, and forensic accounting investigations. 

AW: What are some of the steps an accountant or tax expert should take after finding out, or has evidence, that a client has committed fraud purposely (or inadvertently)?

Wilson: The first key step to take, once a client fraud has been discovered, is for the outside accounting professional to review your firm’s engagement letter with that client to verify your terms and conditions. It is also advisable to seek out partners within your firm that review firm risk and to consult with your general counsel to discuss potential exposure. Simultaneously, determine if your firm is providing other services (audit, consulting, etc.) to the client, as your firm may also have imputed knowledge of facts that could potentially tie you to the fraudulent activity.

Communication within your firm is important. Make sure that all engagement teams are in contact, they are questioning suspicious issues, and continually assessing the clients and the firm’s risks.

AW: Would it be particularly sensitive or challenging for the accountant to approach the client of misconduct if there had been a long-term business and friendly relationship with the client?

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Dominic is Deputy Editor of AccountingWEB


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