AICPA Insurance Programs

Once upon a time, hiring employees was not complicated. It seemed a simple recommendation, or a brief meeting and a handshake, was testimony enough to hire an employee for a lifelong career of loyal service - to endure happily ever after.

Today there's no such fairy tale.

Did you know that resume fraud alone is costing businesses an estimated $600 billion annually, or about $4,500 per employee? The Association of Certified Fraud Examiners, 2002 study

The reality is, a growing number of job applicants are taking desperate measures such as embellishing their credentials, misrepresenting their backgrounds - and committing outright fraud - in efforts to improve their chances of meeting certain job requirements and outshine their competition.

According to ADP Screening and Selection Services, last year's background screening statistics in the business services sector revealed:

• 54% of candidates submitted false information on resumes
• 40% had credit records showing a judgment, lien or bankruptcy, or had been reported to a collection agency.
• 4% had a previous workers' compensation claim.
• 6% showed a criminal record over the last seven years.

http://www.screeningandselection.adp.com/SASS/aboutUs/adpBackground.html

So CPA employers, in particular, should take a closer look. If you're unintentionally letting fraudulent resumes advance beyond your desk, you're inviting risk into your firm.

Resume fraud causes a host of liabilities; it can hurt productivity, and it can lead to turnover, bad publicity, lost clients and costly litigation. With today's heightened security risks, and rising concerns about workplace violence and negligent hiring lawsuits, it makes your job of validating trustworthy, qualified employees more crucial than ever.

Yet, surprisingly, many CPA firms today do not have basic pre-employment screening as part of their hiring process; some even neglect to furnish employment applications. According to experts, skipping such important details can lead to trouble.

What can you do to prevent resume fraud? Verify.

Bill Horne, Director of Human Resources at CPA firm Larson Allen* says a comprehensive pre-employment screening has been instrumental in helping his firm avoid hiring liabilities. And, he says, it's been a driving factor in creating the positive culture for which his firm has become known.

"We're in the world of public accounting where people are watching every move we make. At the end of the day, we're held responsible, so we need to confirm a candidate's qualifications. More importantly, we need to see whether the person is being honest - whether they have accountability," said Horne. "By commanding integrity in the beginning, it only leads to success throughout the organization."

While having a thorough pre-employment screening process can help your firm reduce hiring mistakes and the costs associated with such mistakes, it's also an important defense against negligent hiring claims. It provides a documented effort in which you've done your due diligence to complete all reasonable activities to identify foreseeable conduct before making a hiring commitment.

*Larson Allen is a certified public accounting firm offering assurance, accounting, tax, consulting, and advisory services to organizations and individuals managing business ventures and finance.

What is a Pre-employment Screening Process?

The Basics You Should Verify
To determine whether you've got the appropriate checks and balances in place at your firm to manage risks inherent in hiring, it helps to take a step back to consider your firm's hiring process holistically - from assessing resumes to background checking and interviewing. There are some basic steps that should be a standard part of your screening process:

1. Past Employment

Stretching dates of past employment and fabricating jobs to fill in gaps in employment history are the most common types of resume fraud. Take notice of gaps in employment and frequent job changes. Watch out for vague job descriptions or broad exaggerations of responsibilities. Be suspicious of unexplained periods of unemployment and claims of proficiency in specific skills.

2. Education and Certification

70% of college students say they lied on their resume. And according to the FBI, approximately a half million people in the United States falsely claim to have college degrees. Keep that in mind, and also pay attention to a highlighted education without a mention of a degree. Have your applicants sign to release transcripts directly to your firm. Use the transcripts to verify grades and degrees.

Did you know that the diploma mill business is a global, billion dollar industry? Diploma mills produce and sell diplomas and degrees to those who have not performed any real work to obtain them. Your education confirmation should include proof of accreditation for the institution being verified.

Be sure to substantiate the validity of the colleges and universities listed on applicants' resumes. You can do this through two organizations: National Council for Higher Accreditation (CHEA)www.chea.org; and U.S. Department of Education www.ed.gov.

3. References

The most reliable, and probably the most important form of reference is a former employer.

When checking work references, ask for verification of job title, salary, dates of employment and responsibilities. Pay close attention to whether the dates of employment given by the applicant match the dates of employment given by the employer. Be most concerned with weak references.

There should be a red flag if a candidate's reference can't provide details on job performance. A suggestion for conducting your conversation is to read relevant parts of the candidate's resume to the former employer and ask for confirmation of the information. Since some employers will only verify position and dates of employment, you can ask whether the candidate in question would be eligible for rehire.

Make it a requirement that candidates provide references of people who have worked directly with them. Ask candidates to provide the name of at least one former supervisor, a peer and a subordinate. The key is to objectively evaluate an employee's performance over time, and from different points of view.

4. Military Records

Know that military service may be one of the most difficult credentials to confirm, with a verification turn-around time in the twelve-week range. Employers looking to verify military records can contact Captain Ronald Hindman, Director of the National Personnel Records Center in St. Louis, MO. http://en.wikipedia.org/wiki/National_Personnel_Records_Center

What You Should Investigate

1. Criminal Convictions
Most public records services (such as Nexis or Choice Point) have criminal conviction records. InfoCheckUSA.com is a national provider of background checks where you can find out if a potential employee has had sexual misconduct or has been sanctioned by the government.

The Fair Credit Reporting Agency (FCRA) indicates that organizations are obligated to use the best possible data, which is not necessarily the proprietary database information. It means going to the local courthouse to obtain public documents. It's important to check criminal records at each address where the applicant has lived, especially when there are unexplained gaps in a resume.

2. Drug Screening

Substance abuse in the workplace costs American employers more than $100 billion every year. This productivity-killer is a common culprit behind employee turnover, disciplinary problems, and absenteeism. The bill for hangover-related absenteeism is $148 million annually. That's $2,000 per working adult. These costs far outweigh the minimal costs of a drug screening test.
http://www.hrhero.com/audio/substance_abuse/?TOP

Be Sure You've Got it Covered

Candidate Consent and Application
It is prudent practice to obtain a signed authorization and release from a potential candidate. Federal and state laws, such as the Fair Credit Reporting Act, govern the retrieval and use of information for employment purposes. Most states allow contingent offers, so you need to tell candidates upfront, and make it clear during your interview process, that checks will be in place.

Consult with your legal expert regarding laws applicable to your firm and be sure to obtain proper authorization forms. Refer to the Fair Credit Reporting Act (FCRA) provisions and Employer Obligations under the FCRA at the Federal Trade Commission web site http://www.ftc.gov/os/statutes/fcrajump.shtm

Attach an application to the resume that includes a signed statement that any false or misleading information would immediately disqualify the candidate. Be sure to ask for the month and year of each job change and reason for transition.

The employment application is a critical step in the hiring process not to be overlooked. As a courtesy to our policyholders, and as part of our broad risk management program, CPA EmployerGard provides a sampling of employee applications created for CPA firms. You can contact your Program representative at 1-800-221-3023 to receive more information.

Establishing and Reinforcing Your Firm's Policies

The hiring process does not end simply with an offer and acceptance. Be sure to create and emphasize a policy defining the consequences of resume and application fraud. Specifically state these consequences and the conditions for termination on your employment application.

Get rid of the unscrupulous employees before they do damage. Be consistent in carrying out your policy of dismissing employees immediately following the discovery of fraud. This can later help you in your defense against certain types of negligent hiring claims.

Horne says his firm applies the same screening procedures and adheres to the same policies and standards for all levels of employment. "Obviously, college kids don't have the same amount of credentials that executives would have...but the process is the same for all levels," said Horne. "Integrity is a standard at our firm."

Interviewing

Selecting the best candidates for your firm doesn't mean disqualifying individuals only on the basis of their background screening results. Pre-employment screening should represent only one key component of your selection process.

Horne advocates that hiring managers should intimately be involved in all parts of the process - especially the interviews. "You can have the best pre-screening methods in the world, but it's not effective unless you have a well-trained staff with the know how to ask the right questions, and you need to know what to look for in the answers too," he said. Having the right insight and asking appropriate follow-up questions helps draw out revealing information.

At the beginning of your hiring process, develop a specific job description for each position. Provide the job description to key candidates; ask them to provide a statement in writing that describes how they best meet your qualifications.

In the interview, base your questions on claims in applicants' resumes that seem questionable. Make sure you get an understanding of a candidate's timeline and what happened during periods of unemployment or gaps in their work. Ask the candidate to elaborate; confusion about self-reported history should be a warning sign. Try to get to quantifiable results. According to Horne, there's embellishing and there's lying - that's what is important to uncover in the interview. Someone may claim they developed something, when in actuality they were part of a team that developed something. If you've got a good interviewer...they'll get through that."

At the same time, he warns not to forget about the human side of the hiring process. "I do believe in giving the candidate - no matter what level they are - the benefit of the doubt to begin with and at least let them explain their background. There have been instances, where incorrect information they've provided may be an honest mistake. We look at the overall circumstances - if a candidate discloses something unfavorable in the application process, we can address issues from the beginning."

Horne further explains that a mistake often made in the interview is the interviewer spends too much time talking. "You need to give the candidate a clear picture of what the job is about, but then you need to ask the hard, fact-finding questions - and then listen to discern. You need to leave the interview with a clear understanding of your candidate."

By taking some deliberate steps to improve the basics of your firm's employee screening process, you can help to:

• Improve the quality of your employee pool
• Reduce resume fraud or negligent hiring problems
• Prevent theft and loss
• Establish a more efficient and productive workplace

Remember, don't surrender to complacency. Never hire a questionable candidate based on their potential, or overlook misrepresentations because a position has been open for a long time. And recommendations, referrals and prior contact with an employee at your firm are not justification for skipping the background screening process.

Brought to you by the AICPA Employment Practices Liability Insurance Program.

Tips to Help You Avoid Resume Fraud and Bad Hiring Mistakes

• Keep detailed records. Document the hiring process and specify the steps you take to investigate each candidate. If you can't reach a reference, or certain proof that you need, having a detailed record of the steps you took can be useful if trouble arises.
• Look on the Internet. You can supplement your standard investigation by checking YouTube, MySpace and Facebook, and Google. You may find revealing personality traits or other information that points to inconsistencies or false statements, which could be cause for alarm.
• Confirm degrees before scheduling interviews. This way, you're not wasting time on unqualified candidates.
• Make sure companies listed for a reference are legitimate (a common trick is to use a friend or fake company number). Use the Internet to verify the company's main number and call your reference contact through it.
• Bear in mind, temporary employees, vendors and consultants pose a threat to your business too, so don't leave them out of your screening process.
• Don't forget to verify professional licenses and memberships. Most licensing bodies and professional organizations have a website and phone number that will verify the member's standing with the group. Inquire whether they've been the subject of any censures or disciplinary actions.
• Be aware that even unintentional mistakes in completing or filing I-9 forms can cost an employer more than $1,000 for each affected employee.
• Complete your background check and pre-employment screening processes before extending an offer, so you're not in the position of being in a legal relationship with a candidate before you collect all the facts.
• Consider retaining the professional services of a background screening company to manage your pre-employment investigations. It can create cost efficiencies by improving hiring cycle time and number of incremental staff required to process background. Legitimate firms are endorsed by the National Association of Professional Background Screeners (NAPBS).