Today we conclude our week-long series on helping you understand some of the terminology used by auditors, particularly Government contract auditors. Today's word is really an acronym but it has evolved into a word through common usage. If you hear the word "SIC" your antennas should go up.
Suspected Irregular Conduct (SIC) is the auditor's euphemism for potential fraud, waste or abuse. All auditors, not just Government auditors, are required by professional standards to consider the existence of fraud in all engagements. It is not their primary job to ferret out fraud, waste, and abuse, but they do need to consider conditions or internal control weaknesses that could make a company susceptible to fraud.
Until a year or so ago, whenever Government auditors had a suspicion that fraud, waste, or abuse had occurred, they referred the matter to a manager for review. If the manager agreed with the auditor's concern, the matter would be referred for investigation. Most of these referrals never made it past the manager's desk because they did not rise to the definitional level of fraud, waste or abuse. Many were based on auditor inexperience, incompetence, or emotion. Adding review steps to the process allowed common sense to prevail most of the time.
About a year ago, after some well-publicized stories about management inappropriately refusing to refer suspicions for investigation, the Government changed its policy to allows auditors to submit their allegations directly to one of the Government's investigative agencies. We don't know how this is working out. It probably increases the investigators workload somewhat. From a contractor perspective however, these referrals could complicate life immeasurably if the investigators come knocking. If you hear the word "SIC" bandied about, be wary and ask questions.