Business Fraud: Quick Ways to Spot Fraud in Your Company

As the CEO/Executive Director, the buck always stops with you.  You want to make sure those ‘bucks’ stay in the company and aren’t lost to fraud or theft.   It is possible to keep an eye out for fraud without going through an entire forensic audit.

There are three main categories of business fraud: 

1. Theft/embezzlement 
2. Financial Statement 
3. Asset Misuse  

Let’s look at each and how to spot it.

Embezzlement is a form of theft and usually refers to stealing from an employer or misuse of funds that are placed in one’s trust. It can be quite simple as skimming cash or as complex as an elaborate bookkeeping scheme.  

🚩 Red Flag: Employees living beyond their means.

Financial Statement fraud involves manipulating items into and out of the various financial reports (Income Statement and Balance Sheet) to hide expenses or inflate revenues to achieve bonus targets.  

🚩 Red Flag: No separation of duties in Accounting.

Asset misuse can be as simple as using company assets (computers, cars, tools) for personal gain, or actually stealing assets, selling them, keeping them, or gifting them. 

🚩 Red Flag: Lack of inventory/asset control.

Knowing how to spot these red flags can save you millions of dollars, lost time, and keep your attention focused on your company’s impact in the world.

Protect your company now and in the future by implementing the following:

• Follow the money – ask questions  
• Conduct background checks of new (and existing) employees
• Separate the functions of the check preparer and the check signer
• Rotate duties of employees in accounting positions
• Review the bank statements on a regular basis
• Understand your numbers and ask questions about them
• Secure access to your physical equipment 

A CEO’s time is best spent on vision, mission, and actions to move the company forward and make the most impact in the world – so minimize the time you need to spend on internal fraud issues by ensuring you have the right controls in place.  It will bring peace of mind, and may save your company millions.