Top 5 for Every CEO to Prevent Fraud Now

Posted on: December 10th, 2014
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 5 Things Every CEO Should Do Immediately, to Help Prevent Fraud

Most CEO’s that have never fell victim to fraud in their organizations tend to believe it “just can’t happen to me”. We tend to be trusting of   employees that handle our finances because 1) we need things off our plate and this is an easy area to delegate and 2) because of our entrepreneurial nature, we tend to see the best in people and situations, not wanting to believe they would take advantage. However, this  is a delusion and without careful attention to details, it is just a matter of time and circumstance before someone steals from our  organizations.

Stealing a credit card through a laptop concept for computer hacker, network security and electronic banking security

Stealing a credit card through a laptop concept for computer hacker, network security and electronic banking security


Here are 5 things every CEO should do immediately to help prevent fraud:

1. Bank Accounts: Give the appearance within your organization that you review the bank statement every month. If the statement comes by mail, then ensure it hits your desk unopened, for review first. If it is generated online, then make a point to go online and retrieve it. Spend a few minutes each month reviewing this statement. Occasionally questioning the accounting department on an item or two that seems unusual, reinforces your surveillance.

2. Payroll: Most CEO’s do not realize that the same employee that is processing payroll is also the only person in the organization seeing the payroll reports. Review these reports periodically. You may be surprised to learn that the Controller gave herself a holiday bonus without your knowledge.

3. Statement of Cash Flows: This needs to be reviewed monthly and can help detect fraud. Watch for changes in beginning cash balances in prior months, or prior years. We have found employees trying to hide entries in the system by putting them into prior months or prior years. Entries booked in prior periods will not be uncovered by looking at the income statement alone.

4. Insurance Deductions: If you offer any benefits where employees contribute to the cost, then there is a fraud risk as this requires two separate transactions: one where the company pays the benefits (for example: the health insurance bill) and another where the funds are removed from the employee’s pay (oftentimes by payroll deduction). Watch for errors with these calculations. We have found employees that add family members to the health insurance plan and conveniently forgot to take the money from his payroll deduction, to cover the cost.

5. Never do this: Never have one person do everything…no matter who it is. We have encountered many unexpected situations. For example, an employed family member has stolen millions from the company and, in another case, an externally hired CPA armed with a signature stamp and a great deal of trust enabled her to steal hundreds of thousands of dollars, by writing checks to herself and not recording them on the company books.

An employee with nothing to hide will appreciate having some of these internal controls in place. This safeguards the company and the employee as his/her ethics will never be questioned. Those that commit fraud are not necessarily evil by nature. It is often personal circumstance, desperation or a sense of entitlement that helps them justify the fraud. When the small things go unnoticed, they inevitably get worse over time. Some simple steps can help prevent this from happening.

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