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Guide: Why coronavirus pandemic means you need to be investigating potential fraud in your car dealership

Time 12 months ago

No-one would disagree Covid-19 is having a hugely damaging effect on the automotive industry.

Along with showroom closures, job losses and reduced cashflow, dealers also have to be wary of fraud.

That’s the advice from UHY Hacker Young which has warned of a fresh wave of fraud and other economic crime arising from coronavirus – and the effects are so damaging they may last for years.


The automotive industry has one of the highest percentage of frauds committed by insiders, says the firm.

In April, dealer group Lookers announced it was expanding its internal fraud investigations to its entire business.

Initial findings from one of its operating divisions resulted in an expected one-off charge of more than £4m in its 2019 financial results.

By the end of June, the investigation had revealed a £19m issue in the accounts.

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UHY Hacker Young’s David Kendrick, said: ‘This just illustrates how allegations of fraud, previously undetected, emerge from the shadows and can result in an eye watering black hole.’

Highlighting the need to remain alert to current risks, Kendrick said: ‘You may wonder why, at your pre year-end audit planning meeting, your auditor queries whether there have been any instances of fraud during the year.

‘It might seem a completely irrelevant question and one that has nothing to do with the audit but ask yourself, are your systems and controls robust enough to deter fraud?

‘Would you know if your employees were pulling a fast one, or your supplier was really who they said they were?’

The firm has issued guidance on the steps a dealer can take to prevent crime from occurring, and highlighted the different types of fraud dealers should be aware of.

They include:

  • Profit manipulation
  • Cash and credit card sales
  • Teaming and lading
  • Kick back/backhanders
  • Supplier fraud
  • Cybercrime

At a minimum, UHY Hacker Young recommends a dealer:

  • Reviews the strength of financial controls and internal processes and guidelines
  • Reminds employees of existing company policies governing conduct and the acceptable use of company systems, devices and information
  • Puts measures in place to identify any unusual behaviour, such as enhanced monitoring or retrospective review of high-risk transactions
  • Warns employees that cyber criminals may exploit the current turmoil to increase phishing attacks
  • Reviews cyber liability insurance and understand how it will respond in potentially harmful
    situations
  • Discusses automotive retail fraud risks with their auditor during the audit planning meeting to ensure key risks are identified and responded to

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James Batchelor's avatar

James – or Batch as he’s known – started at Car Dealer in 2010, first as the work experience boy, eventually becoming editor in 2013. He worked for Auto Express as editor-at-large and was the face of Carbuyer’s YouTube reviews. In 2020, he went freelance and now writes for a number of national titles and contributes regularly to Car Dealer.

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