Question

Companies can erase opportunities of fraud by using different methods, briefly discuss these methods and give your opinion on which way is the best and why?

Answer 1

These are the few Strategies for erasing opportunities for fraud in Business

Employee fraud is one of the significant problems faced by organizations of all types, sizes, locations, and industries. While we would all like to believe our employees are loyal, honest, and working for the benefit of the organization (and most of them probably are), even there are still many reasons why your employees may commit fraud and several ways in which they might do it.

Few Types of Business Fraud

Fraud may come in many forms but can be broken down into three main categories

Assets misappropriation, corruption, and financial statement fraud. Assets misappropriation, although least costly, made up 90% of all fraud cases studied. These are schemes in which an employee steals or exploits its organization’s resources. This are few Examples of asset misappropriation that are stealing cash before or after it has been recorded, making false expense reimbursement claims, and/or taking non-cash assets of the organization.

We can control fraud by following ways

1. Know Your Employees

Fraud perpetrators often display behavioral traits that can indicate the intention to commit fraud. Observing and listening to employees can help you identify potential fraud risks. It is important for management to be involved with their employees and take time to get to know them. Often, an attitude change can clue you into a risk

2. Implement Internal Controls

Internal controls are some plans and/or programs implemented to safeguard your company’s assets, ensure the integrity of its accounting records, and deter and detect fraud and theft. Segregation of duties is one of the important components of internal control that can reduce the risk of fraud from occurring. For eg, a retail store has one cash register employee, one salesperson, and one manager. The cash and check register receipts should be tallied by one employee while another prepares the deposit slip and the third brings the deposit to the bank. This can help reveal any discrepancies in the collections.

Documentation is another important internal control that can help reduce fraud. Consider the example above; if sales receipts and preparation of the bank deposit are documented in the books, the business owner can look at the documentation daily or weekly to verify that the receipts were deposited into the bank. In addition, make sure all checks, purchase orders, and invoices are numbered consecutively.

3. Monitor Balances when employees in vacation

You might be impressed by the employees who haven’t missed a day of work in years. While these may sound like loyal employees, it could be a sign that these employees have something to hide and are worried that someone will detect their fraud if they were out of the office for some time. It is also a good idea to rotate employees to various jobs within a company. This may also reveal fraudulent activity as it allows a second employee to review the activities of the first.

4. Hire Trustworthy Experts

Many of the people working for your company, including Certified Fraud Examiners (CFE), Certified Public Accountants (CPA), and CPAs who are Certified in Fraud Forensics (CFF) can all play important roles in establishing antifraud policies and procedures. However, not all of these experts have the experience or the reputation for providing the service that is best for your needs.

5. Live the Corporate Culture

A positive work environment can prevent employee fraud and theft. There should be a clear organizational structure, written policies and procedures, and fair employment practices. An open-door policy can also provide a great fraud prevention system as it gives employees open lines of communication with management. Business owners and senior management should lead by example and hold every employee accountable for their actions, regardless of position.

Fraud Detection

In addition to prevention strategies, you should also have detection methods in place and make them visible to the employees. According to Managing the Business Risk of Fraud: A Practical Guide, published by Association of Certified Fraud Examiners (ACFE), the visibility of these controls acts as one of the best deterrents to fraudulent behavior. It is important to continuously monitor and update your fraud detection strategies to ensure they are effective.

In my opinion, Internal control is one of the best way to prevent fraud in an organization. If the company introduced a strict internal control we can detect frauds very easily. Internal control provided deferent ways and techniques for farads detection and prevention.