Preventing and detecting fraud

Major corporate frauds and collapses hit the headlines from time to time and many of these were high profile and the amounts involved quite spectacular.

While the issues associated with well publicised frauds may seem far removed from your business, the simple truth is that fraud can affect businesses of all sizes.

It is easy to think that fraud is something that ‘wouldn’t happen here’, but whether you employ a small team or a significant workforce, here is my guide to increasing your awareness of the factors that indicate fraud.

I have also sets out the defences that you can implement to minimise the risk within your business.

  • Consider which areas of your organisation could be at risk, then plan and implement appropriate defences. Target the areas where most of your revenue comes from and where most of your costs lie. Develop some simple systems of internal control to defend these areas.
  • Wherever possible don’t have only one person who is responsible for controlling an entire area of the business.
  • This in particular includes the accounting function but will also include other key areas. For example ordering goods, stock control and despatch in a business where stocks include attractive consumer goods.
  • Always retain a degree of control over the key accounting functions of your business. Don’t pre-sign blank cheques other than in exceptional circumstances and ensure that the corresponding invoices are presented with the cheques.
  • Be on the lookout for unusual requests from staff involved in the accounting function.
  • Watch out for employees who are overly protective of their role - they may have something to hide. Similarly watch out for disaffected employees, who might be bearing a grudge or those whose circumstances change for the worse (or, inexplicably, for the better!)
  • Watch out for notable changes in cash flow when an employee is away from the office, on holiday for example. Similarly be aware of employees who never take their holiday. These could both be indicators of fraud, something we see when we look back retrospectively.
  • Prepare budgets and monthly management accounts and compare these against your actual results so that you are aware of variances. Taking prompt investigative action where variances arise could make all the difference by closing the window of opportunity afforded to fraudsters.

If a fraudster is caught, learn from the experience.

Karin Wilson
TaxAssist Accountants