What other steps can employers take?
Almost all fraud prevention strategies relate to oversight. Where possible, management should try to create a segregation of duties so that no one individual has control over critical information that isn’t reviewed. You don’t want the individual who pays the bills also determining who your company does business with. Have another individual involved in the process wherever possible.
When an employee has no oversight, it doesn’t take that person long to realize it, and the fraud factors — opportunity, need and rationalization — have a chance to fester. Most people are ethical and won’t give in to the temptation that opportunity provides. However, management doesn’t need to take that chance. Take away the opportunity and the perception of need and rationalization may never arise.
In smaller companies, it’s often difficult to create a segregation of duties. However, there are ways to monitor information relating to an individual’s activities. If management can’t review a person’s work while it is happening, they can always monitor the results in a timely fashion after the fact.
How can employees play a role in fraud prevention?
Get employees to feel part of the organization. Employees provide the best fraud protection a company can have. Employee education is the foundation of preventing and detecting fraud. If your employees are aligned with the company’s goals, they will keep one another in line and won’t tolerate misbehavior. They’ll believe misbehavior impacts them. However, if employees don’t feel aligned with management and the business, they may turn a blind eye, or commit fraud themselves.
How can a forensic expert help employers address fraud?
In a preventive situation, a forensic expert will assist management in strengthening and documenting the ethical environment they’ve created, and assist them on how to communicate those beliefs to employees. Simultaneously, the forensic expert will identify and address the weak points in the company’s internal controls so that the opportunities for fraud are minimized.
Once fraud has occurred, there are no positive scenarios. Management has already lost the money, and the chances of recovery are small. Investment in a forensic team to determine how the fraud occurred incurs even more costs. It is always much easier, and far less expensive, to invest in a little protection up front by proactively implementing the preventive fraud practices that reduce the always-present risks of fraud.
Clark Keeler, CFE, is director, Assurance & Consulting at Burr Pilger Mayer. Reach him at (415) 863-3868 or [email protected].
