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Episode 3: Trust Is Not An Internal Control
Don’t Let Fraud Get The Best Of Your Business
When it comes to protecting your business or nonprofit organization, you can never be too careful. We don’t just say the phrase: “Trust is not an Internal Control” — we believe it. Scroll through this page to find a wide variety of helpful information, such as videos, infographics, articles and other tools that can be used to protect your most valuable asset.
Do you want to learn more about occupational fraud and what you can do to prevent it from taking over your business and undermining your success? Check out a few of the articles below.
“Fraud occurs in organizations and even small organizations and family-owned businesses like the ones we work with quite frequently,” says Annie Yoder. “It’s so often I hear: ‘I trusted that individual … I’ve worked with that person for 20 years.’ … Although trust is important, and you need to trust your employees, trust is not an internal control. It’s not going to stop fraud from happening in your organization.”
For the same reason you wouldn’t expect your eye doctor to repair your tooth, you shouldn’t depend on your annual audit to detect occupational fraud in your business.
ill the lack of internal control procedures result in the untimely demise of your business or organization? Studies show that if you don’t take action against fraudulent behavior today, tomorrow could be too late.
In its most recent version of The Report to the Nations on Occupational Fraud and Abuse, the Association of Certified Fraud Examiners (ACFE) analyzed 1,483 cases of occupational fraud, which resulted in losses totaling more than $3 billion. Of those cases, the ACFE found that businesses with 100 employees or less are more susceptible to financial losses as a result of the three categories of occupational fraud – corruption, asset misappropriation and financial statement fraud.
Investigators have found that nearly one-third of all businesses victimized by fraud were lacking appropriate internal controls, leaving them open to the real threat of occupational fraud. Read on to learn cost-effective ways to protect your most important asset.
In today’s world, fraud is everywhere. In business. At the bank. On the playing field. And unfortunately, it’s even in the schools. You’d like to believe it’s not happening in your school district (and hopefully it’s not), and you want to feel like you can trust your team. But the fact of the matter is it’s your management’s responsibility to develop strong internal controls to prevent fraudulent activity and to implement procedures to help detect fraud.
Internal controls are processes and procedures designed to ensure that accounting data is properly authorized, recorded and reviewed to ensure its accuracy. These also include controls to ensure that physical assets are properly safeguarded to prevent misappropriation.
Whether it’s due to limited resources or staffing, you may find it difficult to find time to closely review the financial activity of various departments within your business. But here’s the thing: not doing detailed reviews can leave your business exposed to increased risk of error or fraud.
DID YOU KNOW? Fraud hotlines are the most effective way to prevent fraud in your business or organization.
to learn more about Red Flag Reporting
Check fraud is a growing problem in our business environment. Technology-savvy individuals can produce realistic counterfeit checks easily. All it takes is the right office banking account information and access to computers and other devises.
Have you evaluated the internal controls over the normal operations of your business? Do your operations routinely involve cash or other liquid assets changing hands? When was the last time that you evaluated those processes and the people who you count on to handle your day-to-day operations? All too often, the answer to that last question is “never.” Sadly, this leaves businesses at serious risk for internal fraud.
In an ideal environment, spending procedures begin with an approved requisition. Next, the funds are certified by approval of the purchase order. Finally, the expenditure is made by placing an order with a vendor or purchasing it directly from a local vendor. Sounds simple enough, right? It does, but even the simplest procedures can be difficult to implement and are often tested or circumvented.