The American Dental Association recently published the results of an extensive study on embezzlement. Among other things, the study considered how victims uncovered the embezzlement taking place in their offices.
Here's where it gets interesting -- only 19% of discovery was prompted by the planned operation of the dentist's system of controls (day-end balancing, review of software audit logs, fraud found by the dentist's accountant etc.). The remaining 81% was discovered by some accidental occurrence (examples include another employee reporting the theft, patients identifying billing discrepancies or an employee working unexplained extra hours).
So what can be learned from this?
There has been a lot written by advisors who suggest that the way to prevent embezzlement is to implement more (and more) controls. I'm sure you have seen articles that give frustratingly long lists of things a dentist should check weekly and monthly.
In addition to the large time commitment that accompanies this internal audit process, I have always questioned its effectiveness. Embezzlers are driven by some powerful forces, and to expect them to be discouraged by some visible and easily circumvented controls seems like a delusional exercise.
With the ADA's survey results reinforcing my view, I hope that dentists and their advisors begin to see the futility of attempting to manage fraud through internal controls and self-directed audit.
Please don't misunderstand me -- there are lots of controls that serve purposes other than fraud detection. For example, even though day-end reviews uncover less than 8% of all embezzlements, these reviews serve other useful purposes like catching clerical errors.
The good news
Since I've just turned your understanding of embezzlement upside down, at this point you are probably looking for a solution. Fortunately I have one, and it is a lot less painful than you might think.
This silver lining is that, regardless of the methodology used to steal, embezzlers behave in very predictable ways. We have developed and constantly refined an "Embezzlement Risk Assessment Questionnaire" that is designed to help you capture and assess these behaviors. Completion will take less than five minutes and could save you a bundle. You can request the questionnaire by sending an e-mail message to firstname.lastname@example.org.