In my previous post Fraud? Not At My Company!  I discussed some of the surprising statistics and rationale behind even a trusted employees motivations for committing fraud.  So, how can I prevent fraud? Nothing can be a 100% guarantee against fraud happening but the following are some ways that fraud can be prevented:

  1. Establish a corporate culture of integrity
  • Set the tone at the top – if workers see dishonesty in the top level management/executive they will believe it is acceptable
  • Reward integrity and honesty
  • Protect “whistleblowers” – The ACFE study referred to above found that in 43.3% of the cases fraud was detected through a tip.
  • Have a zero tolerance policy with regards to kickback from vendors, getting “favors” from vendors, etc.
  1. Segregate duties when possible.
  • There is a cost/benefit analysis that needs to be done with this. However, if your Company is small and one person does it all, then you, the owner, need to spend more time reviewing the books and records.
  1. Random/Surprise review of desk and work area
  • Fraud often time is stumbled upon randomly opening the employee’s mail before it gets to them (Company mail, not personal). Ask clients and vendors about your employee.
  • Insist on vacations and insist that someone else takes over that role while the person is on vacation.
  1. Reconcile bank statements promptly
  • Someone other than the person that reconciles it should review it and also review the bank statement and cancelled checks.
  1. Keep an attitude of skepticism
  • NEVER think it can’t happen here, or that person could never be a fraudster
  1. Keep an eye out for red flags, (but not limited to):
  • Living beyond means
  • Financial difficulties
  • Unusually close association with vendor/customer
  • Unwillingness to share duties/go on vacation
  • Showing up at odd hours
  • Divorce/family/medical problems
  • Addiction problems

Unfortunately, it seems that fraud is becoming more and more prevalent. If you are concerned about your Company’s vulnerability to fraud and what to implement more controls to help prevent it, please contact us and we can evaluate your current internal controls and suggest additional controls for you to consider to put in place.


Disclaimer: All content provided in this article is for informational purposes only, and is subject to change. Contact a DS+B professional before using or acting on any information provided in this article