Advice From a Toronto Forensic Accounting Firm: How to Minimize The Risk of Fraud in Your Business
We all want to trust that our employees are not capable of fraud. However, faith in the character of your team is simply not an adequate fraud control for a business of any size. Our Toronto Forensic Accounting team has assembled some simple strategies to help you minimize your risk of exposure and loss:
1. Make Sure Internal Controls are Built Into Every Process
Usually fraud occurs when there is pressure (e.g. to maintain a lifestyle), opportunity (e.g. when an employee has the ability to manipulate accounting records with no oversight), and rationalization (e.g. employee rationalizes the fraud by saying “I’m working so much overtime and I’m not paid for it”). Areas that are left without proper checks or balances are susceptible to fraud by employees.
Most importantly, stringent internal controls include proper segregation of duties as well as management oversight to reduce the opportunity for employees to commit fraud.
By making certain that your processes have appropriate internal controls in place, you are removing some of the opportunity, and therefore the temptation, for employees to commit fraud.
2. Review Regularly (And Irregularly As Well)
The diligence of performing internal control checks such as reconciling bank accounts, conducting inventory counts, reviewing credits applied against accounts receivable, reviewing authorizations of new accounts payable vendors, etc. not only helps to detect fraud early, but also serves as a constant reminder and deterrent for any potential fraudsters.
Random and unexpected ‘spot checks’ by Toronto forensic accounting experts not only make fraud detection more difficult to evade, but may also identify company policies not being followed.
3. Implement Company-Wide Anti-Fraud Education
Fraud protection is about more than just keeping your employees in check. It’s about educating everyone in your business about fraud prevention, including owners and senior leadership. This not only ensures that everyone involved knows how to identify and report instances of fraud, but also provides an explanation for why certain internal controls have been implemented.
4. Keep Whistleblowers Anonymous
A significant percentage of fraud activity is discovered and identified by whistleblowers. According to research, whistleblowers are responsible for over 40% of fraud detection. However, fear of repercussion or a negative reputation can be a major deterrent for an employee who has spotted something wrong and wants to do the right thing.
Ideally, there should be a confidential whistleblower program in place that allows an employee to report fraud without drawing suspicion or unwanted consequences to themselves.
As a part of your company-wide anti-fraud education efforts, ensure that your employees are aware that an anonymous whistleblower program exists for their benefit.
5. Contact Our Toronto Forensic Accounting Team to Catch Fraud Early
It is critical that every business place an emphasis on minimizing the risk of fraud and instituting measures to catch fraud early. An assessment by a forensic accountant will identify vulnerabilities in your current operations that should be addressed in order to reduce the risk of fraud.
In the event you suspect a fraud has occurred, Fuller Landau’s team of Toronto Forensic Accountants can help identify how the fraud occurred, the amount of the fraud, and the potential for asset recovery.
To learn more, contact us today for a complementary consultation.