Fraud can be broken down into three categories; Asset Misappropriation – when a company’s resources such as funds are stolen or exploited before or after being recorded; Corruption – occurs when an individual uses their influence in business relations as an advantage. Lastly Financial Statement fraud – when an individual omits or inputs false information in a company’s financial reports.

One effective way to prevent fraud within a company is to know your staff. Employees are not the only ones who participate in fraudulent activity. Executives and even owners, partake. A solid and trustworthy staff will aid in the prevention of loss in supplies, products and/or funds. While some employees are faithful, hardworking and believe in helping a company reach its ultimate goals, there are still some employees who will engage in fraudulent activity. Having an open door policy where employees can comfortably report any suspicious activity without the fear of negative repercussion, as well as fraud awareness training, is also a valuable defense against fraud.

Implementing programs for the protection of the company’s assets guarantee the integrity of its accounting records. These programs should be consistently reviewed for effectiveness. Internal as well as external audits also an assist in fraud prevention. This could be done by frequently monitoring your business structure, employee behavior and information systems. Delegation of department to managers or supervisors makes it easier to screen the going-ons within a company.

Recruiting experts such as certified fraud examiners and certified public accountants can be very beneficial towards the fight against fraud. Their job is to provide a company with basic consultations as well as internal audits and financial forensic analysis. It is also possible for a supplier to “skim” items from a shipment without a company being aware. Therefore, regular revision of suppliers and screenings is also a good idea.

As horrible as it may sound, fraud happens within a company more often than you think. Whether it is a multi-million dollar company or a small start-up business, every company is susceptible. Implementing a solid policy and the proper procedures and protocols in place will minimize fraudulent activity.

Rickeshia P | DBPC Blog