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Auditors aren’t the only individuals who need to be in a professional skepticism frame of mind.

  • 08/22/2017
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By Eduardo Hernandez

One of the perks of working for a dealership is (hopefully) getting a good deal when it’s time to buy or lease a vehicle. Whether it’s applying a legitimate employee manufacturer incentive(s) and/or structuring an aggressive deal, there are many ways to get a good price. Regrettably, there will be employees that are going to try to do everything to get an even better deal and it’s something we’ve seen happen time and time again. Those on the frontlines of the dealership, like salespeople, F&I managers, or sales managers, are in the best position to take advantage of the dealership for personal gain.

Recently during an audit, we found a single journal entry to write a vehicle down by almost 20% to “market value,” that was requested and approved by a sales manager. It turned out, this vehicle originally belonged to that same sales manager who sold the vehicle to the dealership a few months before. The sales manager had also requested the write down on the same day the vehicle was wholesaled and the wholesale appeared to breakeven because of the write down.

Unfortunately, that wasn’t the only suspicious incident we came across relating to this sales manager. This sales manager was also appraising trade-ins which he intended to buy for personal use.  The sales manager would set the trades’ ACVs below market and would purchase them at essentially cost. In one case, a vehicle was traded back to the dealership with an additional 2,500 miles at a $6,000 higher ACV than the initial ACV from a few months prior.

Although the individuals in the accounting office have to rely on the information provided by the different departments, they should always keep a professional skepticism frame of mind. Controllers should actively encourage individuals in the dealership, especially in the accounting office, to question transactions, even if approved by a manager. Had the initial write down been researched and the thread been pulled a bit further, the pattern of inappropriate behavior of this sales manager could have been detected and controls put in place to prevent it.

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