- Hire the “right” employees. Interviewing, checking references, and doing background checks can’t be underestimated. Your employees are key resources for the success of your business and for controlling fraud.
- Have a written statement which outlines ethics policies and repercussions for fraudulent actions.
- Implement financial controls. Separation of duties is the simplest way to avoid fraud. The person processing the transaction should be different from the one recording it. If the company size prevents the distribution of responsibilities among staff, it becomes the owner’s responsibility to audit the financial activity. Some simple things to do follow.
o Deposit cash and checks daily.
o Secure blank checks.
o Don’t sign blank checks.
o Review invoices prior to signing checks and file original invoices.
o Verify new vendor’s name, address, and association with your business.
o Review bank statements and cancelled checks. Statement envelopes should be opened by the owner, not an employee.
o Periodically hire an outside accountant to audit your books. If at all possible, let the audit be a surprise to your accounting personnel.
- Implement technological controls.
o Each person using your computers should have an individual ID and password.
o Restrict access to sensitive applications, functions within an application, and files.
o Use your systems support as a resource to help implement technological controls.
- Implement physical controls.
o Install video cameras near cash registers, entrances and exits.
o Keep petty cash locked. Periodically make a surprise count of petty cash.
o Maintain a list of valuable inventory and keep the inventory locked.
- Implement management controls.
o Have employees fill out and sign time sheets.
o Don’t allow accounting personnel to work longer than a year without a vacation.
Pursuant to U.S. Treasury Department Regulations, we are now required to advise you that any federal tax advice contained in this communication, including attachments and enclosures, is not intended by the Sender or Sandra G Johnson, CPA, P.C. to constitute a covered opinion pursuant to regulation section 10.35 or to be used for the purpose of (i) avoiding tax-related penalties under Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any tax-related matters addressed herein.
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