Chances are, theft is occurring in your business as you read this–or at least within the last thirty days. Those you trust may be taking you for a ride. That’s usually how fraud occurs. Therefore, you need to know how to prevent white-collar crime. Below I provide you with plenty of free understandable resources to help you stop fraud. Take a look.
For most organizations, it’s not a matter of if fraud will occur, it’s a question of how much will be taken. The Association of Certified Fraud Examiners’ biennial survey shows that the average business loses 5% of its revenues to fraud. Imagine adding that amount to your bottom line, because when theft occurs, your net income is reduced by the amount taken.
Most business owners, board members, governments, and nonprofits think “fraud may happen in other organizations, but not in our place. Our people are honest.” Well, let me say I’ve seen plenty of “honest” people steal.
In almost every fraud I’ve seen, the business owners and fellow employees are greatly surprised by the theft–usually by a trusted employee.
And these trusted people steal because they can. You may be thinking, “What?” Let me repeat, the reason people steal is because they can. In fraud prevention parlance, we call it “opportunity.”
And, how do trusted employees steal? Here’s the typical cycle:
So, the employee goes from trusted employee to fraudster. The transformation occurs gradually. Then when the discovery of fraud occurs, everyone is shocked.
And what kinds of trusted people steal?
I have seen the following individuals take money:
I could go on, but you get my point. People who we think would never steal, do.
So, how can we prevent–or at least lessen–the threat of fraud? Transparency is a key.
If transparency is important, why don’t businesses create it?
Small businesses often lack the ability to segregate accounting duties, and this lack of segregation creates opportunities for theft. Why? One employee controls several critical accounting processes, resulting in the ability to steal without detection.
To lessen the possibility of fraud, we must create transparency in accounting processes. Employees are less likely to steal when their actions are visible to others. That’s why segregation of duties is necessary–more eyes see the accounting activity, making it more difficult for theft to occur without detection. Even if an organization has few employees, it’s possible to create transparency and lessen the threat of theft.
CPA Hall Talk is designed to provide you with fraud prevention information.
While I can’t visit everyone that needs fraud prevention assistance, I can provide (free) information about how theft occurs and how you can lessen the threat of fraud.
Here are some of my fraud prevention posts (each with a clickable link):
I hope you find these articles helpful in fighting fraud in your organization.
Finally, I hope you’ll join us here at CPA Hall Talk for more information about fraud prevention, accounting, and auditing. See the subscription box below.
Do you desire to increase your knowledge of fraud prevention and detection? This book will get you there quickly. Click the "buy now" button to see the book on Amazon.
Charles Hall is a practicing CPA and Certified Fraud Examiner. For the last thirty years, he has primarily audited governments, nonprofits, and small businesses. He is the author of The Little Book of Local Government Fraud Prevention and Preparation of Financial Statements & Compilation Engagements. He frequently speaks at continuing education events. Charles is the quality control partner for McNair, McLemore, Middlebrooks & Co. where he provides daily audit and accounting assistance to over 65 CPAs. In addition, he consults with other CPA firms, assisting them with auditing and accounting issues.
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