Planning for Protection Against Fraud

Protect Your Business from Average Loss of over $100,000

Fraud deals a devastating blow to companies of all sizes every year. Per international reports published by the Association of Certified Fraud Examiners (ACFE), the median loss among businesses with 100 or more employees is $104,000, and that of businesses with 100 or less employees is $200,000. With planning and preventative measures, you can better protect your company from falling victim to such losses.

Planning to Protect

Below is a list of a few basic internal controls that can be useful for companies of all sizes and industries. These controls not only help prevent fraud, but also improve reliability of information, efficiency, and help to keep businesses competitive and in line with their goals.

1. Physical Control – Manual and/or systematic controls should be implemented to safeguard both physical assets, such as fixed assets or cash, and intangible/electronic assets, such as bank account numbers or patents.
2. Proper Authorization/Approval – Preferably, systematic controls (e.g. usernames/passwords) should be set up within a company’s software to limit the access of employees to only those areas within the system they are responsible for. Alternatively, a physical control in which employees are required to sign off on their work could suffice if the former option is not viable.
3. Segregation of Duties – If possible, custody, authorization, recordkeeping, reconciliation, and review functions should be given to different people. If this proves to be not cost beneficial, increased review by an independent employee, coupled with periodic reviews by the owners and their independent CPA, can help to compensate for a lack of segregated duties (see below.)
4. Independent Review – Subsequent to the posting of journal entries, completion of reconciliations, remittance and reception of payments, etc., an employee (preferably a manager/supervisor) should review the related documentation, which should always be available for review by the owner and their independent CPA.

Planning to use these approaches to protect against fraud is the first step. Actually putting them in place is what creates the real benefit.

These basic internal controls can be applied to most companies; however, due to varying company sizes and industries, an effective control environment should be tailored specifically for each company.  Please contact us through our website (www.pricecpas.com) or call 615.385.0686 to schedule an appointment if we can assist you in proactively planning and implementing internal controls to help protect your company from fraud.

Gary Pounders, CPA, CFE

Price CPAs, PLLC