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Fraud – Is Your Business a Potential Victim?

BY Paul Sheahan, CPA, CFE
05/29/2014 - 3:21pm

It happens all too often, business owners find that they and their company have been a victim of fraud. Fraud can negatively impact an organization by undermining its financial security and damaging its reputation.

Small businesses are more vulnerable to fraud because resources are usually limited and there is usually a lack of segregation of duties among employees. There are several different types of fraud; however, asset misappropriation is the most common type of fraud to affect small businesses.

Some of the common asset misappropriation schemes are:

  • Check Tampering Schemes – An employee steals his or her employer’s funds by intercepting, forging, or altering a check drawn on the organization’s bank accounts.
  • Billing Schemes – An employee causes his or her employer to issue a payment by submitting invoices for fictitious goods or services, inflated invoices, or invoices for personal purchases.
  • Expense Reimbursement Schemes – An employee makes a claim for reimbursement for fictitious or inflated business expenses.

Business owners need to be aware of and watch for these fraud schemes.  Having strong internal controls in place is an effective way to prevent and detect fraud; however, internal controls can be circumvented through collusion or management override of the controls.  

There is action that you can take if you believe fraud is taking place in your organization.  A Certified Fraud Examiner (CFE) is an option to assist in detecting and uncovering fraud.  CFEs have the ability to: examine data and records to detect and trace fraudulent transactions, interview suspects to obtain information, write investigation reports, advise clients as to their findings, testify at trial, understand the law as it relates to fraud and fraud investigations, and identify the underlying factors that motivate individuals to commit fraud.

If you suspect fraud is occurring at your business or would like help putting internal controls in place, give us a call.