Incidences of fraud in the workplace are occurring more frequently. Studies have shown and our practice has experienced a considerable increase in the number of employer-based fraud investigation cases along with many other fraud schemes. With fraud on the rise it’s important that we all take time to get educated about what to look for and understand the proactive steps we can take to avoid common fraud schemes. Below is a short list of some of the factors that have contributed to employee theft and other common fraud problems and prevention strategies.
Lack of Segregation of Duties
When a business grants too much authority to a non-owner employee, the gate is opened for theft. That employee can write checks to himself or his own company for consulting or other services. Many times, the owners of the company are unaware this embezzlement is occurring until the cash has been drained from the business.
The solution to avoid this situation is for proper segregation of duties to be implemented to prevent the key employee from having absolute control over the company resources. An example could be the key employee who signs checks does not receive the bank statement or reconcile the bank accounts.
That should be done by a third party and should be reviewed by the business owner.
Lack of Oversight of Employee Activities
When employees have access to accounting records and cash accounts, it is possible to embezzle by paying ghost employees or non-existent vendors and manipulating the accounting records to cover the theft.
The solution to prevent employee fraud in the workplace is to implement proper checks and balances to be in place, so that employees with access to cash accounts are not permitted unrestricted or unauthorized access to the accounting records, and all activities are reviewed and approved by a third party, such as a supervisor.
Spouses Unaware of the Marital Community’s Assets
When couples are headed down the path to divorce, the spouse with minimal or no knowledge of the marital community’s assets is at risk. We see many cases where spouses are left with virtually no access to funds once the marriage falls apart. The spouse who handles the finances for the couple can begin syphoning funds out of the community in anticipation of the divorce.
The solution is for the non-financial spouse to keep apprised of the couple’s financial affairs, including locations of liquid funds such as cash deposits and investment accounts. Both spouses should occasionally review their collective finances to ensure each is knowledgeable about their investments.
The prevention of fraud requires a concerted effort on the part of business owners and spouses. Having the knowledge of how fraud is perpetrated is the first step to safeguarding assets and securing your financial future.
If you’re in need of forensic accounting or fraud investigation services, from investigation of embezzlement to internal control assets to fraud preventative programs contact the team at Veriti Consulting LLC by calling 855-232-4410 or send an email.
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