Fraud may seem like an issue exclusive to large companies, but statistics tell a different story. According to a 2004 survey by the Association of Certified Fraud Examiners, the average loss of 508 surveyed companies was $100,000. Average losses for smaller companies were even higher at $135,000. It is important to remember that besides its financial impact, fraud can have many other negative effects, such as damaging a company’s reputation, reducing staff morale, etc.
While every company should review its fraud risk on an ongoing basis, this process is especially important when a business undergoes changes, like hiring new staff, changing its organizational structure, etc. Here are a few very simple steps you can take today to help protect your business tomorrow:
1. Conduct A Fraud Vulnerability Assessment
Available through Joseph A. Truscott, A Professional Corporation, this assessment involves examining your operating and accounting systems to see where fraud could occur as well as the degree of risk that is present. For example, if you have a bookkeeper handling your accounts but no one else is checking your bank reconciliations, this would represent a high level of risk.
2. Implement Suitable Anti-Fraud Controls
Based on your assessment results, you will probably need to implement some very simple but effective anti-fraud controls in some key areas. These are controls and procedures that, prevent, deter, detect, and report fraud. They go beyond the basic traditional internal controls most organizations already have established to prevent fraud.
Anti-fraud controls can vary depending on the size of your business. For example, in a smaller business, one person may handle multiple duties which increases the risk of fraud. In the case of a bookkeeper, a fraud risk exists if the individual has access to accounting and banking records.
An easy way to address this challenge would be to have your business bank statements mailed to your home for review instead of your business. This simple procedure can greatly reduce the chances that your bookkeeper may alter your banking information.
Common anti-fraud controls that organizations of any size may want to consider including anonymous reporting systems, a code of ethical conduct, and employee fraud training.
The risk of fraud is a serious concern for every organization, whether it is a public company or an owner-managed business. Help protect your business today by ensuring you have the right anti-fraud controls in place.
3. Common Anti-Fraud Controls
Anonymous Reporting Systems
Sometimes an employee may suspect something is amiss but hesitate to speak up because they are afraid of losing their job. Setting up an internal telephone hotline gives your employees an opportunity to report their concerns anonymously, without worrying about reprisals.
Either an internal staff member or a third-party source may be responsible for answering your hotline.
Code of Ethical Conduct
A code of ethical conduct is another common anti-fraud control. While a number of companies already have such a policy in place, they do not always follow it themselves.
To increase its effectiveness, your management team must monitor the policy regularly for compliance, remind your employees it exists (for example, during staff orientations and training sessions), and ensure it is adhered to strictly.
Employee Fraud Training
Front-line workers often hear and see things management and owners never would. Employee fraud training can help increase staff awareness of how fraud can happen, and what to do when it does.
Please Call Us Today at 905-528-0234 to Discuss Any Concerns You May Have or email Joe at [email protected].