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communication / fraud-detection / audit-psychology / diligence-fail

Stop Calling It a 'Small Error' — That’s How Fraud Sounds

Adjectives like 'minor' or 'small' are red flags in diligence. They signal that you are trying to minimize a problem rather than solve it. State the fact, not the feeling.

Elena Dossier Elena Dossier

Adjectives Are Evidence of Guilt

You believe that by calling a problem “minor,” “legacy,” or “clerical,” you are guiding the auditor’s perspective. You think you are framing the issue as insignificant.

You are doing the opposite. You are triggering the Skeptic’s Reflex.

When I read an email that says, “We found a small discrepancy in the inventory count,” I immediately ask:

  1. Why do they feel the need to tell me the size?
  2. Are they afraid of the real size?
  3. Is “small” a relative term? (To Enron, $10M was small).

Minimization is a defense mechanism. It tells me you are anxious about the finding. And if you are anxious, I must dig until I find out why.

The Red Flag: The Emotional Modifier

Review your Q&A answers and Disclosure Schedules for these forbidden words:

  • Small / Minor / Tiny
  • Just / Only
  • Basically / Essentially
  • Administrative / Clerical

These words attempt to bypass scrutiny. “It was basically a handshake deal” usually means “We have no contract and unlimited liability.”

The Protocol: The Clinical Correction

We replace adjectives with artifacts. If there is an error, we execute the Correction Protocol.

Step 1: Isolate the Fact State what happened without commentary.

  • Bad: “We had a small mix-up with the bank dates.”
  • Good: “January deposits were recorded on Feb 1 due to holiday bank closure.”

Step 2: Quantify the Exposure Give the exact number immediately.

  • Bad: “The amount was negligible.”
  • Good: “Variance is $4,200, representing 0.03% of Q1 revenue.”

Step 3: Cite the Remedy Show the governance fix.

  • Bad: “We fixed it.”
  • Good: “Reconciliation process updated. See 01_Finance/Policies/Cash_Rec_Policy_v2.pdf.”

[TO EDITOR: Guidance for illustration. A side-by-side comparison of two emails. Email A (The Amateur): ‘Hey, sorry about the mix-up, it’s just a small typo!’ Email B (The Pro): ‘Correction: Cell B4 updated to reflect verified source. Impact: immaterial ($20).’]

The Perception of Competence

Governance is boring. It is dry. It is precise. When you use flowery, minimizing language, you sound like a salesperson trying to hide a scratch on a used car.

When you use clinical, precise language, you sound like a CFO who has total command of the ship. Be the CFO.

FAQs

But isn't $500 immaterial in a million-dollar deal?

The amount is immaterial. The *control failure* that allowed the error is material. It suggests your systems are leaky.

How should we describe a mistake then?

Clinically. 'Discrepancy identified in Q3. Reconciled in Q4 via Journal Entry #402.' No emotion.

Does apologizing help?

No. Apologies are for social mishaps. In finance, we do not apologize; we correct and document.