The Association of Certified Fraud Examiners 2012 Report to the Nations on Occupational Fraud and Abuse reveals that the typical surveyed organization lost 5% of its annual revenue to fraud, at a median loss of $140,000 per case. http://www.acfe.com/rttn.aspx.
The ACFE’s 2012 Report is based on data compiled from a study of 1,388 cases of occupational fraud that occurred worldwide between January 2010 and December 2011. All information was provided by the Certified Fraud Examiners (CFEs) who investigated those cases. The fraud cases in our study came from 94 nations — providing a truly global view into the plague of occupational fraud.
Our friends at GrowthForce provide the following observations.
There are numerous reasons why organizations, particularly small businesses, lack a system of internal controls. A common culprit is limited resources, which can complicate even the simplest of safeguards, such as separation of duties.
In addition to mitigating fraud risks, proper internal controls ensure that the flow of information into an accounting system is valid, timely and classified in the right period. High standards net high quality information, from which businesses can make informed decisions and take strategic actions. The overall goal is to make it harder to steal and easier to uncover, however, no system has the power to prevent 100% of crime.
A system of internal controls for fraud prevention is only valuable if it is universally known, universally understood and universally endorsed. Tribal knowledge is not sufficient for ensuring all employees understand policies and procedures. Once a system is adopted, it must be documented in the employee handbook, incorporated into training through standardized procedure manuals, and reinforced through continuing education and appropriate modeling by management.
An ounce of prevention is worth a pound of cure. This checklist provides a great starting point:
Fraud Prevention Checklist
- Do employees understand what constitutes fraud?
- Is this information in the employee manual and incorporated into training?
- Does management set the right tone (zero tolerance)?
- Do employees believe they can speak out freely?
- Do employees know the proper channels for reporting?
- Are performance goals realistic?
- Are anonymous surveys conducted to assess morale?
While this fraud prevention checklist provides guidance for implementing best practices within your organizational workforce, strategic measures must also be taken to identify gaps and minimize weaknesses in your company’s internal controls.
Please contact me if you would like to discuss how I can help your business adopt the strategy and tactics necessary to prevent fraud and to help you reach a higher level of success!