Circle of Trust

In the '80s, McDonalds conducted a study to determine what motivated its employees to steal. Their studies revealed that:
- One-third of employees stole only if they had the opportunity (unlocked cash drawer, alarm not set at night, etc)
- One-third of employees stole no matter what the circumstances
- One-third of employees never stole no matter what the situation

Our number one objective as auditors is to reduce a company's exposure to fraud. One of the most effective strategies for auditors is to immerse yourself in the operation to learn about employee behaviors, along with likes, and dislikes. For example, if you know an employee is suffering from congestive heart failure and he requires expensive medication that the insurance company does not pay for, you may cross-reference payroll records to see if he is able to pay for the med's through salary alone.

1. How can we get into employees' "circle of trust?"

2. In order for us to conclude that someone is concealing evidence, we must first identify how they go about their business. What signs should we look for? Over time, if we are not careful, working relationships can form into strong bonds which can cloud our objectivity. We can ill-afford to have our integrity questioned at any stage of the audit.

3. Do you have an example of how auditors have applied 'spirit of the law' and / or 'letter of the law' in their travels?