The Axiom Analysis is our dealer internal audit approach. What makes the Axiom Analysis unique is that it applies Cognitive Situational Awareness (CSA) techniques and treats every dealership as a unique entity. Unlike other internal audits that work off of a checklist and test every dealership the same way (despite the size, location, franchise, personnel, profitability, management and ownership of the dealership), Axiom knows every dealership is unique and that no two dealerships share the same risks.
Having completed over 500 internal audits collectively, we have identified certain truths (axioms) about dealership operations:
- Embezzlements that cripple a dealership are not one-time hits, rather more of death by a thousand cuts. The largest embezzlements are typically conducted by employees who know the weakness in management and its operations and thus opens the door to systematically bleed a dealership of its cash.
- We have yet to find a dealership where an employee was not intentionally circumventing dealership controls for personal benefit or to the detriment of the dealership. While we are optimistic, we believe that there is at least one employee in every dealership abusing their given authority.
- “Tone at the Top” of a dealership is the single greatest internal enabler/motivator for individuals committing embezzlements. The actions or inactions of owners and management are often the catalyst to perpetrate fraud.
- Not every embezzlement has a scorecard. In other words, not all embezzlements run through the financial statement, many dealership embezzlements occur “off the books”, making it more difficult to detect and quantify losses.
Knowing these truths, we developed the Axiom Analysis.
The Axiom Analysis works as follows: One of our advisors conducts preliminary interviews with owners and/or management to assess the culture and operational proficiency of the dealership. Based on the information gathered, certain operational risks or blind spots will emerge. The advisor will then extract 6 to 12 months worth of financial and operational data from the DMS and apply CSA techniques in generating exceptions aimed towards identifying risks within the dealership.
With our CSA approach, we are fishing where the fish are, unlike other internal audits. Likewise, we are not looking for a needle within a haystack, rather we are looking at a pile of needles. Hence, the Axiom Analysis allows our advisors to identify critical exceptions from a pool of exceptions.
Once our exceptions are generated, we forward a list of exceptions to the dealership to obtain select source documents for our team to verify. Based on the verification of these documents our team will be able to extrapolate the risks faced by the dealer and provide supporting documentation as to circumvention of dealership controls as well as recommendations for the improvement of the store’s internal controls.