Do you keep a count on the number we encounter today?
Be it tax scam, immigration scam, charity scam, social networking scam, fake check scam, or the grandparent scam, it’s causing havoc in the finance world.
And who is in the role of busting the fraudster?
We have accountants to fight financial fraud. They are the true superheroes who are busting frauds for decades.
Accountants pride themselves on their role as protectors of their clients -- using their continuing education; vast resources from the IRS and industry; and even the audit process to help business owners and investors to side-step the worst of scenarios.
1. Reallocating the accounting duties
Because of their size, many small businesses have one person that always handles bookkeeping functions such as client receivables, processing client payments, paying invoices, managing petty cash, and recording these functions in their accounting system. This makes it easy for cases of fraud to go unnoticed. Businesses should have at least two persons handling these functions interchangeably, keep the handling of cash and accounting functions totally separate, or have the functions performed through a virtual CFO relationship with an accounting firm.
2. Recognizing your workforce
While every business strives to hire honest employees, having a formal hiring routine, even at a small business, can help prevent fraud. Background checks should be performed for all staff handling cash or managing payments (and bank account information) from customers. As the employee’s level of interaction with finances increases, so too should the scrutiny paid to their past, and present, situations.
3. Regulating internal affairs
Even small businesses need to create and maintain internal controls that can prevent or detect fraud. This includes restricting access to financial account data, inventory access, establishing multi-person sign-off on expense reimbursements, overtime, all check writing functions, and other accounting or payroll functions, and performing an overview of audit logs to ensure the integrity of the books.
4. Managing business transactions
With online banking options, it’s easy to view account activity and statements whenever is convenient, and business management should do this frequently to make sure that paper-based statements in the office have not been manipulated. The key items to look for are missing or out-of-order checks, unknown payment recipients, and checks that were signed over to a third party instead of deposited in a business account. Simply letting staff know that reviewing check activity is part of the accounting review process can help prevent fraud.
5. Auditing the record books
Businesses should routinely audit areas that deal in cash, refunds, product returns, inventory management, and accounting functions. Additionally, occasional non-scheduled audits can also help detect fraud in high-risk, critical business areas. The ACFE offers a Fraud Prevention Check-Up to help businesses identify the risk of fraud and develop controls to prevent losses: http://www.acfe.com/fraud-prevention-checkup.aspx.
6. Training employees to discourage accounting frauds
Employees in fraud-prone areas of the business should know the warning signs of fraud, prevention skills, and how to report suspicious behavior or actions by coworkers and customers. Establishing an anonymous reporting system or process can also set their mind at ease about letting their bosses know about a fellow coworker. The management, including owners of small businesses, should create a code of ethics that makes it clear that unethical behavior will not be tolerated.
7. Asking for an expert consultation
If a business has implemented fraud prevention steps and the numbers still aren’t adding up, or when there are larger legal implications, it may be prudent to hire a professional accountant to come in and perform a more extensive review and audit of the business’ books and control processes. CPAs and Certified Fraud Examiners can provide extensive help in fraud detection and prosecution, if necessary.
We at Miles Education, a premiere skilling & training institute for finance & accounting professionals, help candidates to earn their US CPA/CMA credentials. The focus for Miles Education has always been to up-skill students and professionals to help them be future-ready and enable their career progression through the US CPA/CMA qualification Committed to achieving this goal, today, Miles is India’s largest and #1 CPA review course! It has been instrumental in building the CPA/CMA ecosystem in India holding offices in 9 cities and partnerships with 100+ MNCs, including all of the Big 4s. Miles Education provides student/professional-centric services while keeping concept-based learning at its core which has helped it climb to the top ranks when it comes to the US CPA/CMA certification in India.