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(First in a series)
By Gary Markey, CPA, CFE, CIA
Stambaugh Ness Accounting and Auditing Manager
As you focus on making money during tough economic times, your employees may be more inclined to take it. A recent Wall Street Journal article reminds us that desperate times can call for desperate measures. As the recession deepens and hard economic times fall on more and more people, it is no surprise that employee fraud is on the rise. Business owners and management need to be acutely aware of this increased risk. Fraud risk is real, widespread and can cripple a business. Just look at some recent local headlines:
- Feds allege woman printed bogus payroll checks
- Waste Management employee admits to taking $700,000
- York County man ordered to pay back about $584,000
- Former bank VP sentenced to nearly 3 years in prison
- Former CEO pleaded guilty to federal fraud charges
- Woman sentenced to prison in embezzlement case (160,000)
- Half-million plus embezzlement brings stiff sentence
This list could go on and on, and these are only the ones that were caught. You can bet in every one of these instances the employer never thought it would happen to them. Where a business sees a loyal dedicated employee, a Fraud Examiner sees risk. In approximately 40% of frauds, the employer is not able to recover any of the losses, so an ounce of prevention is truly worth a pound of cure.
What can you do? Studies performed by the Association of Certified Fraud Examiners demonstrate that having appropriate anti-fraud controls in place can reduce average losses to fraud by over 60%. Considering the average small business loss due to fraud is $200,000, this is a significant savings.
Over the next four weeks, we'll highlight four ways in which you can implement anti-fraud controls by:
- Developing Effective Fraud Prevention Programs
- Implementing Effective Fraud Reporting / Whistleblower Programs
- Using Computer-Assisted Data Analysis
- Identifying the Red Flags of Fraud
Businesses insure themselves against any number of risks everyday. Doesn't it make sense to do what you can to insure against fraud?
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IRS Circular 230 Notice: To ensure compliance with requirements imposed by the IRS, we inform you that any US tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. |
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