According to the 2010 Report to the Nations on Occupational Fraud and Abuse from the Association of Certified Fraud Examiners, organizations lose 5% of their annual revenue due to employee theft. Fortunately, there are ways to detect and prevent accounting fraud cases before they occurs.
1. Know Your Employees
Talk to/learn about your employees
Identify the signs of a potential fraud risk
o Family troubles
o Family illness
o Loss of employment by a spouse
o Employee spending beyond his/her means
2. Employee Awareness
Set policy including types of fraud/consequences
Make employees aware of policy
Good for both honest employees and those who may commit fraud
3. Internal Controls
Plans/programs implemented to protect assets
o Segregation of duties
o Documentation
Monitor/update internal controls
If no plan in place, hire professional to help
4. Vacations
Encourage every employee to take vacation time
o Not missing a day of work in years can indicate fraud
Rotate jobs periodically
o Rotating jobs allows another employee to uncover possible fraud
5. Financial Analysis
Compare financials to own company -- prior years
Compare financials to industry
Follow through with investigation for any irregularities
6. Bank Statement Control
Owner or financial exec should control
Statements should be sent to location other than business
o Small company -- send to owner's home
o Large corporation -- send to separate office w/in company headquarters
7. Tip Line
Anonymous, toll free tip line
Implementation should be done with help of fraud expert
Tips can come from those outside the company as well
o Customers
o Vendors
o Competitors
o Acquaintances
8. Hire Experts
CPA can help in establishing anti-fraud policies
Internal audit
Forensic analysis
Forensic Accounting utilizes accounting, auditing and investigative skills. Forensic Accountants testify in court to make since of financial information and appear expert witnesses in legal cases.
