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Fraud Prevention Tips for your Dealership

By Mercedes Hendricks, CPA

We all know and understand the fraud triangle; that fraud most often occurs when individuals have external financial pressures, are presented with opportunities to commit fraud, and can rationalize their behavior.  While you may not be able to influence financial pressures or rationalization, you can minimize the opportunities by implementing preventative internal controls.

What do these internal controls look like?

  • A no-tolerance culture for fraud. Sure, no one will say that they tolerate fraud.  But take a close look at the culture of your dealership.  Do you talk about fraud and communicate your no-tolerance policy?  Do your leaders follow that policy and model it for the rest of the employees?  Creating an environment where integrity is the trump card is a great way to prevent fraud.
  • Require individuals with access to the DMS to take vacations, and have their duties covered by another trained employee during their absence.  You might be surprised what questions arise when someone else is asked to perform another’s duties.
  • Have a fraud tip hotline and communicate this with your employees. Provide them with a means of communicating inappropriate behavior without any repercussion.
  • Control user access to the DMS by implementing new hire and personnel change controls whereby access to the system is requested, reviewed and approved before being granted.
  • Prohibit new user profiles in the DMS to be created by copying existing profiles, except from standard, reviewed, unmodified templates for new hires based on their position.
  • Segregate duties as much as possible. This is much easier said than done, for sure.  However, focus on the ones that are most important in your dealership.  Often, this involves segregating controls over cash.

As summer approaches and most of your year-end reports have gone out, it may be a great time to revisit your fraud prevention controls.

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