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Hire the right employees. Prevention
is always better than a cure. Be sure to screen potential employees thoroughly,
checking past employment, personal and professional references, and criminal
records. This is especially important if the person will handle cash or
inventory. You may even consider hiring a graphologist to determine if the
potential employee is trustworthy and able to work in your environment.
Separate accounting duties.
Many small businesses depend on one person to open mail, process is payments,
make bank deposits, pay invoices, handle petty cash, and reconcile bank
statements. This unrestricted access
makes a business vulnerable. CPAs say it's a good idea to divide accounting
responsibilities so that no single individual controls all of the financial
activity. If your business doesn't have sufficient personnel to separate duties,
you can try rotating financial responsibilities every few months. In any case,
make it a priority to actively understand and verify your business's financial
information.
Have bank statements mailed to
your home or a post office box. Review bank statements
before your bookkeeper does. Be on the lookout for missing checks, checks that
are out of order, checks written to suppliers or people you don't know, and
checks made out to a third party but endorsed by someone in your company.
Arrange for surprise audits. Catching an employee
off-guard can be your best defense in discovering fraud. Make it a regular
practice to bring in a CPA once a year, at different times, to conduct a
surprise audit of your company's financial records. This makes it difficult for
a dishonest employee to cover up his or her actions. In addition to uncovering
fraud, the knowledge that the company conducts surprise audits can act as a
deterrent.
Insist that all employees take allotted vacation time.
Research has shown that employees who are committing fraud sometimes resist
taking a vacation because they must remain on the job to cover up their
fraudulent activity.
This information was brought to you by the
Illinois CPA Society. The Illinois CPA Society, founded in 1903, is the fifth
largest CPA Society in the nation, with more than 22,000 members. It is the only
professional organization that represents CPA's in the Illinois. During its over
100 years of existence, the Society has advanced the highest ethical and
financial standards of the profession, and has been a leader in educating the
public on financial issues.
Produced in cooperation with AICPA.
©2006 The American Institute of Certified
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