The CFO'S Perspective

Don’t Trust Your Accountant!


What would we do without our accountants? We rely on them for accuracy, reporting, transaction processing, analysis, and financial advice. For non-accountants, the discipline can be a mystery. So, we try to find a good accountant to add to our team and then we trust them to do their job. That’s what we should do, right?

Actually, no.

You shouldn’t trust your accountant. Well, hopefully, you can trust them, but you shouldn’t.

Hiring an accountant with integrity and expertise is not enough to protect your business, and it is naïve to simply think that it will be good enough to find someone with the right experience. I cannot understate the importance of solid internal controls, especially these days as business fraud and cybercrime are on the rise.

The Importance of Internal Controls

Having strong internal controls in place communicates your commitment to ethical and accurate accounting processes, protecting you from shady practices both internally and externally. Solid internal controls put up a wall to deter unscrupulous behavior and defend the company if something goes awry.

If your accountant pushes back on implementing and maintaining internal controls, this should immediately raise a red flag because these types of controls can protect accounting staff as much as the overall business. Therefore, your accountant should not only be okay with having internal controls in place but insist on it!

While there are many types of internal controls that businesses can utilize, none are so important for accountants as dual control and limitations on authority. Dual controls establish a framework where more than one person is required to execute a transaction. This is as much for the accountant’s protection as it is the organization’s protection because it ensures that a member of management can’t go rogue and undertake transactions without the knowledge of the accountant or accounting manager. Limitations on authority are an acknowledgment that everyone has limits on what they can execute. Now, it’s important to remember that these limits are not a reflection of how trustworthy someone might be. They are simply a way to distribute responsibilities for greater accountability. Capping an individual’s power uses segregation of duties to ensure power is not concentrated in the hands of one person.

Dismantling The Fraud Triangle

In my experience, even the presence of internal controls can be a deterrent even if they are never tested. Why? Because they remove the opportunity for business fraud to exist; those with ill motives will move on to an easier target. With opportunity removed, the fraud triangle (which is made up of pressure, opportunity, and rationalization) can’t exist.

For more information on the fraud triangle, check out Todd Kimball’s informative three-part series:

Fraud Factor #1: Pressure
Fraud Factor #2: Opportunity
Fraud Factor #3: Rationalization

Who is Responsible for Managing Risk?

The responsibility to take risk management seriously relies squarely on senior leadership, and ignorance is no excuse! If your accountant brings you an idea that you aren’t entirely clear on, strongly consider saying no unless you fully understand it. You might be lacking the financial insight or broader context to understand why it’s necessary right now and just need more information to decide wisely, or you might be falling victim to a fraud scheme. If what is being proposed is so cutting edge or fancy that only the accountant understands what is going on, you might be sorry later.

Regaining Lost Trust

So far, I have been speaking primarily to business leaders who have no reason not to trust their accountant. But what about the business leaders who are already leery of their accountant because they have been burned before in the past by an employee that did something unethical or fraudulent? Trust that has been violated is especially painful.

There are real losses in the form of reputational damage, both for the company as well as for the leader. There may even be incurred liability in the form of fines, penalties, and restitution (not to mention the money or data that was stolen in the first place). And those are just the real losses!

However, there are emotional losses to consider as well. The financial obligations that result can carry on for months or even years depending on the situation, prolonging the headache and stress associated with the incident. Leaders in this kind of situation tend to second-guess their actions and possibly even blame themselves for what occurred. So, how do they get past these feelings to be able to trust their accounting staff again?

Here are my top tips for minimizing risk:

  • Lean on an outside party for their expertise. Solicit the opinion and advice of your mentor, board treasurer, or an outside third-party consultant.
  • Don’t be afraid to ask questions. There are no dumb questions. None! (Especially given what’s at stake!)
  • Take “baby steps” in your efforts to trust again. Trust, but verify.
  • Don’t just stand still. Get moving! You may feel paralyzed, but you need to move on.

When you need experienced financial consultants to help you implement accounting controls or to right the ship after fraud has occurred, we can help. Our team of fractional CFOs and outsourced Controllers has the knowledge and expertise needed to get your organization back on track. Contact us to find out how we can help today!

About the Author

nancy-smithNancy Smith is a high-capacity financial manager with success in a wide variety of settings in both the nonprofit and for-profit sectors.  She is passionate about engineering process improvement and navigating transitions, resulting in sustainable efficiencies and cost savings.  In addition to core accounting competencies, she is experienced at managing other support functions such as IT, Human Resources, and Operations.

Nancy has directed the accounting and finance functions of multiple organizations as a full-time employee and as a consultant.  As Chief Financial Officer of World Relief, a $45M international relief and development organization, she led the integration of two finance departments and provided increased visibility and accountability of program operations through improving financial models and analysis. Most recently, she was Director of Accounting at the Evangelical Free Church of America where she acted as controller for a combined $40M budget of the denomination, its US and international programs, and its charitable foundation.  Nancy began her career as the Accounting Manager for C&C Paints, and has also worked in public accounting at Ernst and Young where she directed and participated in consulting projects for telecommunications companies and trade associations.

Nancy is licensed as a CPA in Washington state.  She holds an MBA in Finance/MIS from the University of Washington and a BA in Business from Seattle Pacific University.


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