Recipe for disaster: Cooking the books

rsz_robmcneill
Robert J. McNeill

So what makes someone cook the books? That's the question I posed to Robert J. McNeill, who used to head Deloitte's audit practice in Philadelphia and now manages the entire office.

"I’ve seen situations and things that have happened," he said during our Leadership Agenda interview published in Monday's Inquirer. "By and large, those things were not intentional. They were errors and things that didn’t go right because of a lack of focus, rather than people setting out to do wrong, although I have seen the later. It’s less frequent than the former -- usually just honest mistakes."

But what about when it isn't honest mistakes?

"My own personal view is that people start out not trying to perpetrate a large fraud," he said. "[They] start out trying to rationalize why something might be a certain way. `If we just look at it differently, we can get the answer to be different.' By changing that answer, it helps the bottom line or whatever. It starts as a very, very small step and then you get the situation of robbing Peter to pay Paul.'"

The problem, he said, is that when they move things to fix one problem, they set in motion another problem, which causes a ripple effect and requires a second deception. "They have to do it again," he said.

So initially, I asked, there may have been some semi-legitimate explanation.

"It’s usually very gray, borderline, -- maybe innocent enough. It tends to cascade over time," he said. "I think they start out small and it starts to snowball. Then, it comes to a point where it becomes unmanageable. Either they blow the whistle on themselves or someone else blows the whistle and then the whole thing comes down."

Continue Reading