Article:

Five dodgy signs you must not ignore at your workplace

17 May 2022

Andrew Howard, Partner, Forensic Services |
Quin Rijnders, Partner, Forensic Services |
Victor Owusu, Associate Director, Risk Advisory Services |

If this title sounds like an exciting story, it is, or at least it could be.

BDO’s Risk and Forensic Services experts have compiled the top five signs that may indicate unaddressed risks, unethical employee behaviour, and issues in your organisation. Our experts recommend organisational leaders, and those charged with governance use these insights to monitor their organisational practices and determine potential risks.

Five dodgy signs

BDO’s experts have identified five recurring dodgy signs which tend to uncover issues in the organisation. These include:

  1. Undisclosed conflicts of interest (COI) surfacing, through multiple means and channels - This may indicate non-arm’s length transactions, occurring either due to a lack of knowledge of your staff base or employees wilfully neglecting your procedures for managing COI. Either way, intentional or not, downstream consequences of undisclosed COI can be severe for your organisation.
  2. The organisation is suffering from high employee turnover - This is a concern if occurring within specific areas of the organisation, and not an industry-wide trend.
  3. Individual employees who don't take entitled leave, or conversely, take high amounts of sick leave - Pay attention to this if more widespread in the organisation, and not just one individual.
  4. Individual employees visibly or audibly spending beyond their spend profile - This includes material items such as cars, watches, handbags, or perhaps more behaviour related, like an apparent gambling habit.
  5. The organisation is suffering from poor cash flow, even though other business activities and reporting looks positive - This may imply the cashflow should be evidently higher than it may be.

Even if just one of these signs is brought to your attention, it’s worth taking a further look.

In our experts' experience, there are even more signs that aren’t as apparent. These are mere ‘lead indicators’, meaning there may be more than meets the eye initially. In reference to the famous analogy, these five signs might be just the tip of the iceberg.

What lies below the surface?

More issues are usually uncovered when further investigations take place. Further analysis allows for root causes to be identified and resolved in the process. To prevent further issues and develop healthy business practices in your organisation, it is worth addressing these root causes as soon as they come to light. 

Further investigations are best tailored to the specific industry, risk drivers and dodgy signs identified. However, there are a few areas our experts suggest organisations are across from a forensic and risk lead indicator point of view.

BDO’s Risk and Forensic Services expert’s standard routines focus on investigating the following areas:

  • An analysis of transactions:
    Identifying transactions that are abnormal for the transaction profile of the organisation. This includes those outside of usual business hours, or for rounded amounts. Before undertaking an analysis, a meeting should be held with relevant organisational stakeholders to ensure this abnormality is specific to your organisation.
  • Benford’s Law investigations:
    Investigating the leading digits on the data in question for abnormal amounts and on a sufficiently large population of numbers. If the data does not follow a ‘natural order’, BDO’s experts suggest further investigation is required.
  • Auditing offboarding procedure compliance:
    Including, but not limited to payments made post-termination date, ensuring access rights have been revoked and assets have been returned by offboarded employees.
  • Checking for ghost employees:
    Checking for employees who aren’t staff members but have been onboarded on payroll, or for a once-off allowance.
  • Reviewing key personnel:
    Reviewing internal online databases and conducting corporate intelligence reviews for undisclosed COIs. This process can exist in a procurement context, however can extend to other forms of business relationships.
  • Payroll trends versus staff trends:
    Identifying gaps between the number of organisational employees and the payroll spend, or infrequent allowances that occur or increase in number or frequency.
  • Delegations of authority:
    Monitoring for compliance with authority limits, particular in the instance purchase order splitting. This may occur when one purchase order is split over multiple purchase orders, to avoid purchase limits.
  • Reviewing procurement procedures to uncover issues:
    Including the review of undisclosed COI between an employee and vendor and unsubstantiated changes of vendor or employee bank account details, or overlap between vendor and employees master data. BDO’s experts can assist your organisation to review its procurement activity, by identifying concentrated activity, such as staff members favouring vendors.

It’s in these areas we commonly find unaddressed risks and unwanted behaviour when working with clients to conduct these proactive scans.

What can you do next?

BDO’s experts recommend commencing work with your internal audit function or similar team, to regularly check these common lead risk indicators under the iceberg risk areas, if you are not already doing so. Should you require assistance with these investigations through a data-driven approach, you please get in touch with your local BDO expert.