Do you consider your Company immune to fraud? Or have you ever thought to yourself, “My employees/ customers/ vendors are loyal and honest; they’d never cheat my Company”? Perhaps, you are more realistic about the chances of fraud being perpetrated in your Company, but you just don’t know how to start looking for and mitigating that risk. If your Company hasn’t confronted the serious risks that you may encounter due to fraud, it may be time to analyze these threats and come up with a campaign for Fraud Risk Management.
The battle should begin by reviewing areas within the Company where fraud has occurred and the impact it has had on the Company. Then a brainstorming team should be formed, in which the team creates an extensive list of ways fraud could be committed. Top management and employees throughout the Organization should be encouraged to construct ideas of how they might steal from the Company or other ways misappropriation of Company assets might occur, and how these modes of theft can be deterred.
This list is then used as a starting point for training on deterrence, prevention, early detection, and efficient handling of fraud risks. Fraud risk training should include everyone in the Company, from the CEO to brand new employees, and should cover things like what constitutes fraud, the code of conduct, and how to report suspected fraud. Effective internal controls that are established in order to prevent and detect fraud, along with the ongoing behavioral training of employees, is the best way to manage your Company’s fraud risks.
A few common mistakes can derail the program, and should therefore be avoided.
- Implementing a fraud policy, but not providing training
- Management not following through on promised steps of the program
- Half-hearted support by management
- Believing the process is a one-time thing and will prevent all future fraud.
Fraud Risk management may sound like a daunting task, but the potential costs to your Company when fraud does occur will be a much harder burden to bear. Anti-fraud internal controls should be put into place, employees and management need to receive continual training on what is and is not acceptable behavior, and a plan should be formed for how to deal with fraud once it is discovered.
For more information, please call LSL CPAs & Business Advisors at 714.672.0022.
