Misconduct on the part of accountants and bookkeepers is an unfortunate reality. While most accountants and bookkeepers are honest and take their work seriously, the small number of bad apples justify taking a cautious approach. As a business owner, any level of misconduct places your entire business at risk.
Here are some warning signs that your accountant may be engaging in misconduct.
- Being evasive or difficult to reach.
- Delivering excuses instead of timely results.
- Failure to maintain accurate, written records of interactions with you as the client.
- Feeling threatened when other specialists (like a tax specialist) start probing for information.
- A sudden separation from their business partners without any preparation or announcements.
The best way to ascertain if something inappropriate is occurring is by working with an independent accountant. Have them assess your financial records and procedures.
When it comes to bookkeeper misconduct, there are other signs that one needs to watch out for.
- Refusing to take a vacation.
- Taking physical records home with them or choosing to always come in early or stay late to complete bookkeeping working.
- Being evasive with requests from your accountant.
- Having a consistent record of misfiling documents such as receipts, invoices and deposit slips.
- Adamant refusal to work with outside solutions providers or online systems where you have more control over the process.
How to protect your company from bad practitioners
The American Institute of Certified Public Accountants (AICPA) makes available to the public the AICPA Code of Professional Conduct, which offers specific guidance on what to expect from an accountant with regards to:
- Principles of professional conduct
- Independence, integrity and objectivity
- General standards - accounting principles
- Responsibilities to clients
- Responsibilities to colleagues
- Other responsibilities and practices
The AICPA also publishes a list of disciplinary actions taken against members who violate the code. This list includes their name, city, list of rules violated and the agreement reached with the offender.
In addition to perusing this list, it’s also helpful to setup a whistleblower program that allows other employees to report misconduct directly to you. The mere existence of a whistleblower program will deter many individuals from following through on their plans for fraud.
Another important step is to maintain a management dashboard that tracks specific financial metrics for your company on a daily basis. Look for patterns like a consistent mismatch between invoice amounts and deposit amounts or low bank balances occurring on a regular basis. This could provide early insight into potential misconduct.
Finally, make sure that your human resources policies ensure that everyone takes a vacation. No one should be indispensable in your company. If a bookkeeper refuses to take a vacation and also “picks up the slack” of other departments, that may be an indicator that something is wrong.
The idea is not to look at every accountant and bookkeeper as a potential delinquent; instead, the goal is to have procedures and practices in place that will make it difficult for you to be a victim of one of the few bad apples.