Signs Your Accountant is Misappropriating Business Funds and How to Prevent the Fraud

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Finding out that your accountant is misappropriating business funds is difficult. They have complete knowledge and intellect to rig your records and books. If you doubt that your accountant is up to no good and are looking to prevent the fraud, here are some tips to detect those symptoms:

Warning Signs in Behavior of Employees

If all of a sudden, an employee starts working in a disorganized manner or remains dissatisfied and largely withdrawn, these are signs that something is not going well. There are some cases when employees suddenly start receiving a lot of personal calls. It is also important to remember that these types of behavior can occur for all sorts of reasons and not due to fraudulent activities alone.

However, if your accountant is someone who has private access to your company books, products and properties and he develops new habits such as coming to the office on holidays or working for longer hours, these are things which you should take note of if you want to know if someone is misappropriating business funds. Any of these signs are reason enough to keep a closer watch on the records and its handler to prevent the fraud.

Accountant in financial difficulties

Usually, accountants resort to the misappropriating of business funds when they are under certain emotional pressure or stress which forces them into committing this heinous activity. Addiction to drugs, gambling, divorce and so on, are some key symptoms that can lead to financial difficulties and debt. Then, it does not matter whether the accountant is a senior, junior, young, old, a man or a woman; they would pose a potential threat to the business.

It is the right of every individual to live in big houses, drive expensive vehicles and savor lavish vacations, provided that they can justify their means with known sources of income. There are times when people can be seen as living beyond their means. Some of the most common signs are overspending, running up credit cards, borrowing more than what can be managed, and so on. All of these will cause financial strain and can lead people to resort to illegal activities, including misappropriating the business fund.

All Eggs in One Basket

If your accountant advocates entire control of all the financial and management functions, there is good reason for you to work up contingencies for prevention of the fraud. A person in charge of entering the bill should not be responsible for applying payments. To ensure misappropriating business funds and prevent the fraud, it is important to segregate duties and establish a system of internal controls. There are occasions when owners make it too easy for accountants to commit fraud.

Establishing Internal Controls

One of the most common methods of reducing the risk of fraud is to set up a system of internal controls. This basically means separation of job duties. Whereas it is not possible to ensure complete prevention of the fraud and misappropriating business funds, but spreading the risk can cause its occurrence to decline. It can make it difficult for frauds to embezzle and increase chances of getting nabbed even if they commit.

Segregation of Duties

The rule of segregation of duties is the foundation of a strong internal control framework. To prevent the fraud, separation of duties includes partitioning the basic obligations into the three essential bookkeeping and accounting capacities between at least two representatives or offices.

It needs to be ensured that you distribute money related obligations and duties among different employees. The responsibilities must be spread out and not confined to one person; a worker who makes the bank reconciliation should not gather checks and money from the customers and the other way around. For instance, one individual can be placed accountable for accepting stock while another worker is allocated the errand of request taking. Furthermore, the individual accommodating the bank transactions ought to never be the one keeping its records and the checks.

Leveraging Outsource

Among all approaches, the best way to prevent the fraud of misappropriation of business funds is to outsource your accounting, bookkeeping and control capacities to an accomplished firm. This takes out the dangers related with an absence of internal controls and guarantees that each transaction is checked for accuracy.

The truth of the matter is that the more individuals you have supervising your books, the less chances are that your organization moves towards becoming a target for frauds. So notwithstanding giving a lot of assurance, outsourcing likewise gives you significant peace of mind.



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