10 Steps to Avoid Business and Employee Fraud
Small and mid-sized businesses are more vulnerable to fraud than larger organizations, and the effects can be more damaging. The types of fraud that businesses need to be aware of generally fall into three categories: Theft, financial statement fraud and asset misuse. Theft, or misappropriation of assets, makes up the majority of fraudulent activity, according to the Association of Certified Fraud Examiners.
These thefts, either by directly stealing cash, claiming bogus expenses or taking other property, are usually done by employees. This is a tough fact for many small business owners, who often consider their employees as friends and even members of an extended work family. The other primary types of fraud involve financial statement reporting and general corruption, such as kickbacks or other schemes in which the employee benefits personally by violating their responsibility to the employer.
The reason small and mid-sized businesses face a greater risk from fraud is due to many factors, including employees performing many functions across the organization, the close relationships between staff that leads to less scrutiny, few formal oversight procedures, less expertise on financial matters, and the large impact on cashflow that even a comparably small fraud event can have on the fiscal health of the business.
Therefore, it’s vital that small businesses take steps to deter fraud, and to detect it as soon as possible.
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Shared from: CPA