7 Steps Companies Can Use To Prevent Fraud

Most companies do not have a strategy to prevent fozia shan siddiqi. Some companies only have a strategy to detect and investigate fraud. Every company must have a strategy to prevent as well as fight fraud. Companies will find that their incidences of fraud will decrease when a well-rounded anti-fraud program is developed that puts measures in place to prevent fraud.

One of management’s biggest challenges is to understand that the risk of fraud can never be underestimated. Those who have not suffered from fraud previously will be unaware of the risks and costs. Management may simply think in terms of the direct financial costs but need to be encouraged to look further at other costs, some of which are consequential loss, legal and investigative costs, regulatory fines, management time, increased insurance premiums, loss of key staff and customers and increased cost of financing or the inability to raise new financing.

Fraud can never be eliminated from a business entirely, simply because collusion can always overcome normal organizational controls. Combating fraud needs a different and fresh approach that should cover all aspects of the fraud cycle which are fraud deterrence and prevention, fraud detection and fraud investigation.

The company’s policy should demonstrate to both employees and the outside world that the company takes the threat of dishonesty, fraud, and theft seriously. The company’s policy clearly states what is considered to be dishonest and warns any potential wrongdoers that the consequences of being caught will be serious. The effect therefore will be to deter potential wrongdoers. This will result in reduced losses from wrongdoing and reduced costs in respect of investigating any wrongdoing.

Establish a whistle-blowing policy

Employers should be encouraging whistle-blowers to come forward as the quicker a business can spot fraud, the better. Not only does early detection diminish the damage to a firm’s reputation, but it wastes less of management’s time, and ultimately costs the business less. This is why having a robust whistle-blowing policy in place is good practice. Having such a policy might also discourage potential whistleblowers from approaching the press as a first resort. In addition, businesses need to engender a culture in which employees believe their concerns will be taken seriously, and that the protection afforded by the law and policies is real.

One of the positive steps that management is to ask their accountant to educate the ompany’s management and staff on how to identify the risks as most employees and management are unaware of the risks faced by their organization. Without knowing what the risks are, they will be unable to take corrective action.

The company’s management must established a code of conduct and whistle blowing policy. The company must segregate duties, implement physical safeguards, and have independent checks. Management must also implement proper approval levels, have proper controls and limit the overriding of existing controls. Management must also implement an effective accounting system.

Some of the methods that management can take to increase awareness of the risks faced by companies include lectures to management and staff on general fraud awareness, presentation of case studies, articles on the company intranet and articles in company magazines.

Before you hire a new employee, managers should stop and ask themselves: “Do I know enough about this person to trust them with my money confidential information and my reputation?”

Companies must check each new candidate thoroughly. Senior positions should be checked far more thoroughly as senior staff usually have more opportunity to commit fraud as they are in positions of trust and usually have the ability to authorize payments and approve contracts. They are also more likely to commit the type of fraud that can permanently damage your business.

New employees are not the only employees that need to be looked at, a review of employees should be an on-going process across the whole workforce especially if an employee was hired when screening was less thorough or not at all or a employee’s situation has changed to the point where they now find themselves under severe financial pressures?

In order to prevent fraud companies should continually review their books and statements to look for suspicious transactions. This should not be done by the party who is responsible for keeping the books and records.

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