How CPAs Can Help Clients Avoid Fraud

How CPAs Can Help Clients Avoid Fraud

As protectors of their clients, many CPAs consider it their duty to prevent their clients from falling victim to any number of scams, from the Grandmother Scam to the Tax Refund Scam. No one is immune to fraud – it affects the young, the old, and even major corporations.

Fraud is only growing in this country. Dave McClure of CPA Practice Advisor points out that the Fraud Enforcement Task Force within the FBI has uncovered more than $8 billion in securities, commodities, and investment fraud losses. In addition, the Federal Trade Commission estimates 48.7 million individual fraud transactions took place in 2005, with an average loss of $60 per transaction. This is why everyone should have a securities lawyer on their side in the event this happens.

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Online Tools.As an accountant, you want to do everything you can to protect your clients; however, you may be unsure of how to go about it. There are some tools gaining momentum on the market today: the Identity Theft Resource Center (http://www.idtheftcenter.org/) and the Scam Detector web site (http://scam-detector.com/) which can aid you in guarding against fraud. These two sites are ripe with information on how to be more aware of fraud, how it happens and how to prevent it. ID Theft Center offers documents, videos, games, training workshops and presentations on risk reduction for both businesses and individuals. Scam Detector blends the benefits of a web site and a smartphone app to help identify and resolve scams worldwide, with resources such as the Better Business Bureau’s list of the most prevalent scams each week.

White Papers. In addition to online tools, there are white papers and research papers on fraud and how to prevent it. Check out this resource from the Office of the State Comptroller for New York (http://www.osc.state.ny.us/localgov/pubs/red_flags_fraud.pdf) entitled “Red Flags for Fraud.” The Leicestershire County government in the UK lists 20 common scams unearthed by auditors. Check out this link: (http://www.leics.gov.uk/audit_twenty_common_frauds_and_scams.htm)

Be wary of scams and alert your clients of potential threats to their financial safety. If it sounds too good to be true, it probably is. One popular scam, called the puppy scam, plays on the cuteness factor. You want a puppy, you see one online advertised on social media, the photos are adorable and the price is right. After conversing back and forth with the pet owner via email, you are asked to send money for shipping the pet to you. You wire the money and never hear from them again. Older adults especially can fall victim to this type of scam because they are eager to buy a cute puppy for their grandchildren or even themselves. To avoid this scam, tell your clients to adopt pets from the local shelter or purchase them in pet stores locally where they can visit the animal in question.

Pull from knowledge of the industry. As a CPA, you’re likely continually trained in your craft, taking workshops, updating your knowledge base and learning new tax laws each year. By drawing on your education, vast resources available from the IRS and others, and the auditing process itself, you can help your clients get around the latest scams by taking the time to clue them in. This is especially true of your older clientele who are statistically more likely to fall for scams due to their trusting nature. However, scams can and do happen to corporate clients and small businesses, bilking them of billions of dollars a year.

Doing your part as a CPA to educate your clients on scams and fraud will help build a better, more trusting relationship with them over time. Tell them the name of a good stock fraud lawyer who can help if they’ve become the victim of misrepresentation. Thomas Law Group has helped investors recover investment loss since 1991.

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