Many organizations and business owners face fraud each year due to their employees or business partners. New entrepreneurial start-ups and small businesses are more vulnerable. The risk of fraud has increased due to the advancement of technology and progressive development of the world into a global village. The increased awareness of technological development and complex organizational structure requires corporations to incorporate internal anti-fraud approaches to combat fraud.
According to 2014 research reports by global nation, organizations face a 5 % loss due to fraud each year, in which internal employees committed 85% of serious fraud cases. Organizations should develop multi-layered fraud prevention strategies while keeping these statistics in view.
Following are the warning signs to detect fraud and stealing by an accountant.
Change in Habits and Behavior
A good manager should know their employees. They manage their time to have frequent conversations with each of them. Good managers are concerned and aware of any problems they face in their professional or personal lives. The basic information about your employee’s family, life, and habits will help detect any change in an employee’s habits.
The first sign that your accountant is stealing from you is a change in their habits. Suddenly becoming more proactive in your business, becoming disobedient towards you, or on the phone more frequently are all signs that could be a red flag. Also, if they are suddenly working during times that no supervisor is present, it’s important to keep an eye on their activities.
Accountant in Bad Waters
Sometimes an accountant under financial stress can turn to fraud to fulfill their needs. The financial crisis could be from the following circumstances:
Sudden debt faced by an accountant due to gambling, drinking, or divorce may be a reason for their fraudulent behavior. An accountant in financial strain may be a potential risk to your business. The financial burdens act as the trigger for theft.
Spending more than earning
If an accountant is spending more than they are earning, it could be a warning sign. Spending excessively on cars, shopping, homes, or taking loans all lead to financial strain, and they may think the only way out of this is by committing fraud.
Loose internal controls
A company’s loose internal controls are providing an opportunity for theft. Easy access to assets, checkbooks, or signed stamps lead the embezzler to find it easy to steal.
How to Prevent Fraud
Fraud deterrence is essential for all organizations. The bigger the organization, the more the chances of fraud increase. Fraud is as old as human history and can happen to any company or business despite the organizational structure and the number of workers. Small business managers tend to trust their workers more than bigger organizations.
There may be weak internal controls. Fraud affects the finances, image, and morale of the company. All factors decline after a fraudulent case takes place. Most organizations adopt shortcuts for fraud prevention. These tactics largely decrease the opportunity for fraud.
The internal controls of a system and organization define the plans to prevent the company and its assets from fraud and theft. This system should be revised frequently to analyze its effectiveness. It should be regularly updated according to the new needs, development, and advancements of a company. Internal controls should clearly define accountability and compliance of its employees.
Documentation is the integral part of an internal control system and the most important tactic for fraud prevention. All procedures and transactions should be documented to minimize fraud. Every expense should be approved and countersigned by a managerial level employee so that the validity of receipts and expenses can be ensured. Restrict all physical and technical approaches to documents and information.
Segregation of duties
Clear segregation of duties is crucial for internal control. Distribution of bookkeeping and payments among two or more accountants or bookkeepers helps to prevent fraud.
One of the best ways to prevent fraud is to outsource accounting and bookkeeping functions to a third party.
Use accounting software to prevent fraud. QuickBooks handles all the key processes of accounting and prevents fraud. Assign limited rights to all employees according to their job descriptions and responsibilities. Don’t share passwords and logins.
Fraud in business can result in major financial loss, wastage of time, and a ruined reputation. The implementation of multi-layered fraud risk strategies leads to a successful business protected from fraud and theft.
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