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Fraud Prevention
Fraud occurs in dealerships quite simply because it can. Our forensic specialists will combine their extensive knowledge of automotive dealerships with their accounting, auditing, and investigative skills to help you uncover and resolve any current problems and deter future fraudulent activities.

Fraud Prevention

Detect and deter fraud in your dealership

Our forensic specialists will combine their extensive knowledge of automotive dealerships with their accounting, auditing, and investigative skills to help you uncover and resolve your current fraud problems and deter fraudulent activities in the future.

The most common fraudulent practices include: non-recording of revenue; withholding receivable collections (lapping); accounts payable fraud; kickbacks; theft of materials; and conflict of interest. 

Prevent fraud: Know the behavioral red flags

Fraud perpetrators (affectionately known as “fraudsters”) often display certain behaviors that may serve as warning signs to management and co‐workers. The two most common red flags are living beyond one’s means and financial difficulties. However, it’s important not to ignore the other warning signs of a possible fraudster.


Services to help dealerships combat fraud

There are a variety of internal control reviews and procedures our forensic accountants can help you implement that protect against these fraudulent practices. These procedures have specific applications in the new vehicle department, new vehicle inventory, used vehicle department, parts department, service department, body shop, and accounting department.

Our forensic accounting and consulting services to help dealerships combat fraud include: 

  • Preparing bank account reconciliations on a surprise basis 
  • Reviewing cancelled checks 
  • Performing physical inventories 
  • Analyzing parts inventory activity 
  • Summarizing fraudulent activity to present for insurance policies and police investigations

 
After preparing bank account reconciliations for a dealership on a surprise basis, our forensic accountants found a cashier was stealing money from daily cash receipts and making up the shortages with the following day’s cash receipts (lapping).

We suggested preventing employee fraud or theft in the future by segregating duties. Prior to this the cashier was preparing the daily deposit slip and reconciling it with the daily cash report. If these duties had been performed by different people the potential for fraud would be eliminated.

Fraud occurs in dealerships quite simply because it can. The three elements of fraud are: 

  • the employee has the means to commit it 
  • the employee can justify it 
  • the employee believes he or she can “get away” with it


Internal controls prevent fraud

In the used vehicle department, we suggest the owner approve wholesalers, review any transaction where a loss occurs, and closely screen the people he hires for responsible positions.

An owner who failed to take those precautions found that his general manager was wholesaling used cars at substantial losses to a company in which the general manager was a 50 percent owner. 

Fraud in the parts department

A year-end parts inventory is another important fraud deterrent. After one dealership owner took $100,000 write-off after a year-end inventory, she asked us to investigate and she found a parts manager was selling dealership parts on the side.

Our team of forensic accountants that knows how dealerships operate can offer you invaluable insights on how to guard against costly fraud through a variety of services, including internal control reviews and employee fraud investigations.

Contact Us

Michelle McHale

877.622.2257, x34059