HOW TO PREVENT YOURSELF FROM BUSINESS FRAUD AND IDENTIFY EMBEZZLEMENT
Dave Ikiedei Asei
23/01/23
MEANING OF FRAUD:
The dictionary defines fraud as action implying guilt and often criminality in act or practice.
This world is filled with criminally-minded persons, so it is good to make preventative measures by every business owners to reduce its fraud risk. The more proactive you are on prevention, the less likely your company will fall victim of fraud even though it is difficult to eliminate fraud one hundred percent, but it will reduce fraudulent incidences to the nearest minimum.
MEASURES TO PREVENT FRAUD:
-Strong internal controls - Fear of being discovered as a fraud star is one of the most powerful deterrents.
Internal controls that are effective raise employees' perceptions of detection and lower their motivation to perpetrate fraud.
SEPARATE TASKS
-Separation of tasks that conflict with one another, independent checks and audits, physical asset security, and proper authorisation and documentation should be paramount in a company’s policy.
-Certain duties are inherently incompatible and provide opportunities for fraud. These duties consist of authorization (approval), recording (posting in accounting systems), and custody of assets (cash, signed cheques). It is imperative that businesses segregate these duties as much as possible.
-Often times, a company does not have enough personnel to segregate these duties. In these situations, it is important to put in place adequate, independent checks (i.e., having someone not involved with a process review the process). Something as simple as a business owner reviewing copies of canceled checks can be an effective fraud deterrent. These safeguards serve as an effective transaction verification tool.
ANNUALLY AUDIT THE ACCOUNTS
-Consider annual audit, even though it may not be required. An audit will not discover all fraud within an organization, but it will give you an opportunity for someone independent from the daily operations to take a look at the business. An audit also tends to motivate all bookkeeping-related staff to keep things honest because they can never be sure what questions an auditor is going to ask or what documents an auditor may request to review.
PHYSICAL SECURITY OF ASSETS
-Businesses should also ensure their assets are physically secured including having locks on desk drawers, keeping overnight cash deposits in a locked safe, and installing security cameras. Proper authorization to approve transactions and documentation also provides fraud prevention opportunities. Limiting authorization and documenting transactions reduces the opportunity for workplace fraud.
REFERENCE CHECKS:
Background checks can assist in preventing the hiring of people who might end up becoming a burden for the company. One of the most economical methods to protect a business from fraud is through background checks.
ORGANIZE FRAUD TRAINING:
A section on fraud awareness should be included in a company's employee handbook, especially describing what counts as workplace fraud and the penalties for doing so. At least yearly, fraud awareness should be spread through training sessions or seminars.
HOTLINE FOR FRAUD:
The Association of Certified Fraud Examiners estimates that employee, vendor, or customer tips were responsible for the discovery of 46% of workplace fraud. Giving staff members a safe, anonymous mechanism to report questionable conduct may significantly lower the risk of fraud
INSURANCE:
Businesses should obtain coverage for dishonest employees through their insurance providers. This type of coverage assists with protecting a business from losses and fees incurred due to fraud by employees. Insurance proceeds can help a business recover fraud losses.
A focus on growing your business should include developing proper checks and balances along the way. By considering various fraud prevention measures and implementing internal controls, businesses can reduce their risk of fraud and save a portion of their revenues. Resource: Association of Certified Fraud Examiners.
ADDITIONAL MEASURES
Protect your personal information:
Keep sensitive information, such as your Social Security number and financial account numbers, private and secure.
Monitor your financial accounts:
Regularly check your bank and credit card statements for any unauthorized transactions or suspicious activity.
Be wary of unsolicited emails or phone calls:
Never give out personal information or financial information in response to unsolicited emails or phone calls.
Use strong passwords and change them frequently:
Use a combination of letters, numbers, and special characters in your passwords, and change them every few months.
Use security software:
Install anti-virus, anti-malware, and firewalls on your computer and mobile devices to protect against cyber attacks.
Be cautious of "too good to be true" offers:
Be wary of unsolicited offers that seem too good to be true, such as job opportunities or investments that promise high returns with little or no risk.
Understand the red flags of fraud:
Be aware of the common red flags of fraud, such as pressure to act quickly, requests for personal information, or requests for money up front.
Keep business and personal finances separate :
Make sure to keep your personal and business finances separate, so that the fraud or embezzlement in one area does not affect the other.
Get professional advice :
Consult with an attorney, financial advisor, or an accountant if you have any doubts about any financial transactions or investments you are considering.
0 Comments