Whether your company has a staff of 10 or 1,000, some of the employees are entrusted with handling cash or other assets. It is a significant responsibility regardless of the size of your budget, and the pressures are magnified during times of economic stress.
There are plenty of recent, local examples of what can go wrong when an individual has unchecked access to assets, incentive to steal and a rationalization for doing so: the union president, the CEO, the accounting manager, the county auditor, the bank executive.
This is International Fraud Awareness Week, which makes it a perfect time to examine your company’s system of checks and balances. After all, it is cheaper and more effective to prevent a fraud than detect a crime.
Barnes Dennig Director Chad Martin is a Certified Fraud Examiner, and he wrote a whitepaper on “Deterring, Detecting and Reporting Fraud.” Click here to download the paper and read more about Barnes Dennig’s Forensic Accounting Services. Chad believes the most efficient way to prevent fraud is to establish a culture of integrity within the organization, and he offered the following advice:
- An organization should have a policy of hiring and promoting individuals with high levels of integrity, especially for positions of trust and in areas where fraudulent activity is most commonly found. If the proper tone is set and the right culture is created, it can lessen the pressure that employees might feel to commit fraud and lessen the opportunity for fraud, as co-workers are more likely to hold each other accountable.
- Management should communicate the company’s ethical values orally and in writing by using a code of conduct, and the code of conduct should be reiterated regularly to all employees.
- Strong internal control can prevent or quickly detect most types of theft and fraudulent financial reporting.
- Taking swift action to terminate and prosecute perpetrators may deter other employees who might consider committing fraud.