Courtesy of GrowthForce’s Blog.

There are numerous reasons why organizations, particularly small businesses, lack a system of internal controls. A common culprit is limited resources, which can complicate even the simplest of safeguards, such as separation of duties.

While many growth-oriented businesses overlook the importance of implementing systems and strategies designed to reduce their risk, it’s certainly a valuable investment when considering the impact of occupational fraud – the typical surveyed organization lost 5% of its annual revenue to fraud, at a median loss of $140,000 per case.

In addition to mitigating fraud risks, proper internal controls ensure that the flow of information into an accounting system is valid, timely and classified in the right period. High standards net high quality information, from which businesses can make informed decisions and take strategic actions. The overall goal is to make it harder to steal and easier to uncover, however, no system has the power to prevent 100% of crime.

A system of internal controls for fraud prevention is only valuable if it is universally known, universally understood and universally endorsed. Tribal knowledge is not sufficient for ensuring all employees understand policies and procedures. Once a system is adopted, it must be documented in the employee handbook, incorporated into training through standardized procedure manuals, and reinforced through continuing education and appropriate modeling by management. A Fraud Prevention Checklist is a good tool to measure the effectiveness or weaknesses of your current prevention strategies.

Fraud Prevention Checklist

  • Do employees understand what constitutes fraud?
  • Is this information in the employee manual and incorporated into training?
  • Does management set the right tone (zero tolerance)?
  • Do employees believe they can speak out freely?
  • Do employees know the proper channels for reporting?
  • Are performance goals realistic?
  • Are anonymous surveys conducted to assess morale?

While this fraud prevention checklist provides guidance for implementing best practices within your organizational workforce, strategic measures must also be taken to identify gaps and minimize weaknesses in your company’s internal controls.

The above is part of a five-part series by GrowthForce.  To see additional Blogs in the series go to GrowthForce’s website.

Statistical Source: ACFE 2012 Report to the Nations on Occupational Fraud and Abuse



Share This:


Leave a Reply

Your email address will not be published. Required fields are marked *