A report from the ACFE (Association of Certified Fraud Examiners) states that occupational fraud often lasts 14 months before it’s detected, resulting in a median loss of $8,300 each month. Over a year, this results in a loss of almost $100k.
It’s essential to take steps to protect your company from occupational fraud. Here are a few safeguards for your company to put into action.
⦁ Require Employees to Take an Annual Mandatory Vacation
One reason that occupational fraud goes undetected for extended periods is that the employee committing the fraud rarely misses a day of work. If the employee is always at work, they have a chance to consistently cover up their theft.
Implement a policy that requires each employee to take a full week of vacation each year. During their absence, have another employee perform their duties. This gives the employee covering their job duties a chance to look for and identify irregularities that are potentially concealing theft or fraud.
⦁ Conduct an Extensive Background Check
Before hiring an employee, conduct a thorough background check to look for previous criminal activity.
This is extremely important when hiring an employee who will have access to cash or handle financial and accounting tasks. You should also ask for references and check these references to learn more about your potential employees.
Have an employee you failed to investigate before hiring? You can still order a background check to see if there’s anything in their past you should know about.
⦁ Always Review Your Bank and Financial Statements
Another common reason occupational fraud goes undetected is that a company’s bank and financial statements remain unexamined for extended periods. Or, the employee committing the fraud may be the individual tasked with handling financial statements.
Review bank and financial statements each month to detect fraud and theft as early as possible. You can also have a business CPA examine your records to determine if anything looks amiss.
⦁ Clearly Define Acceptable Procedures and Expectations
Have a written employee manual that clearly states what steps are necessary for procedures involving cash, expense reimbursement, paying bills, or any task that presents an opportunity for fraud.
For example, the procedures for obtaining and dispersing petty cash should be thoroughly explained. Consider requiring two signatures for transactions over a certain dollar amount or for duties that create an easy opportunity for fraud.
Not sure what controls and safeguards your procedures should include? Your business CPA can review your procedures to see if they’re missing any vital elements that can protect your company.
Want to confirm that you’re protected from occupational fraud? Contact Gurian CPA Firm to examine your control procedures.
