Behind the Scenes of Fraud Defense: How Accounting Firms Can Reduce Risk and Avoid Lawsuits

Ever Wondered What It’s Like to Work on The Jaw-Dropping Cases Featured on American Greed?

Natalia Greene, Esq., CFE, Principal at Lemme, a division of EPIC, has spent over two decades defending accounting firms in professional liability claims involving fraud and embezzlement. Today, in her role as a Claims Advocate & Risk Management professional, she shared her experience and lessons learned on The Diary of a CFO Podcast.

The Real Risk Isn’t Fraud—It’s Client Selection

Fraud doesn’t start in spreadsheets, it starts with client acceptance and continuance, and ignoring red flags. Natalia emphasized that annual client risk reviews aren’t optional. They’re your frontline defense against legal exposure and reputational damage.

One case she shared involved a $22 million embezzlement by a corporate officer with an accounting and finance degree, who struggled with a gambling addiction. Another case involved a trusted advisor who stole from local business owners she had befriended, which was a fraud featured on an episode of American Greed. These stories underscore a critical truth: the biggest risks often hide in plain sight.

Why Accounting Firms Get Blamed First

When fraud surfaces, accounting firms are often the first target. Why? Because they’re perceived as the gatekeepers of financial integrity. There is also a common misconception that accountants are uniquely equipped to uncover embezzlement or collusive fraudulent schemes, even though the scope of their engagement is very limited and not intended to do so. In reality, fraud is typically discovered by whistleblowers who work alongside the fraudsters.

Natalia explained how vaguely defined services and scope creep—expanding services without updating engagement terms—can silently increase professional liability and drag firms into lawsuits they never anticipated.

The Insurance Policy Every Accounting Firm Needs

If you’re a fractional CFO, CPA, or firm owner, one policy is non-negotiable: professional liability insurance with tailored terms to address your firm’s specific risks.

Natalia explained why this coverage is essential for protecting against claims of negligence, fraud allegations, and client disputes that can cripple a business. She also highlighted the importance of working with a skilled insurance broker to determine what other insurance coverages are often overlooked but important, including cyber, crime, and Directors & Officers (D&O) policies. Finally, she stressed the value of having a broker who can review with you how these policies will coordinate and respond.

Key Risk Management Strategies for Accounting Firms

• Client Acceptance & Continuance: This isn’t just compliance, it’s survival.
• Annual Risk Reviews: Reevaluate every client relationship regularly, at least once a year.
• Watch for Scope Creep: Update engagement letters whenever services expand or change.
• Invest in Professional Liability and Other Insurance: Understand what insurance coverage your firm needs based on its exposures. Don’t wait until you’re in court to discover the gap.

Fraud cases make headlines, but the real story is how firms can prevent exposure before it happens. If you want to hear all the details, including the wildest schemes Natalia has seen, listen to the full episode of The Diary of a CFO Podcast.