Fraud in the workplace has become a major topic of conversation over the past few years. It seems that frauds of various types are being reported at a rate far greater than just a decade ago. Are there really more frauds being committed today than ten years ago, or are we just getting better at finding them?
Whatever the answer to that question is, it is clear that one of the best methods of detecting and preventing fraud is a strong system of internal controls. According to studies done by the Association of Certified Fraud Examiners, 19% of detected frauds are uncovered by internal controls. In comparison, only 12% are uncovered by audits. This does not mean that audits are ineffective. This finding occurs because organizations that have strong internal controls are able to detect and stop frauds before the auditors start their work. And, of course, earlier detection normally means smaller losses for the organization.
How strong are the internal controls of your organization? Are they adequate to safeguard the organization’s assets? Are they well designed and appropriately implemented so that fraudulent acts will quickly come to light? Are they strong enough that potential thieves know they will get caught, and therefore don’t even try?
Following are a dozen basic questions that should be answered “yes” for most organizations. Ask yourself these questions and rate your organization’s controls:
Our experience shows that organizations that answered “no” to some of these questions often came to regret it. For example:
How did you do on the questions? If you could not answer “yes” to all of them, or you really are not sure about the answers, it is probably time for an independent evaluation of your control procedures. The questions above only cover very basic controls and only scratch the surface in comparison to the inquiries in a true study and evaluation.
One of the fraud prevention services we offer is a study and evaluation of both the design and the implementation of an organization’s controls. Such a study involves far more in-depth questions than those above and often uncovers flaws and shortcomings in the system. Once we dig in, we often uncover “holes” in the system of controls that no one had ever thought of before. Sometimes an organization’s system of controls is flawed because it is not properly designed for that organization. In other cases, the system of controls is properly designed but has not been properly implemented. Either way, the organization has a problem.
So, how do you rate the controls of your organization? As Certified Public Accountants and Certified Fraud Examiners, we routinely perform both fraud prevention services and fraud detection services for clients. We can get involved in fraud prevention, and help you stop losses due to fraud before they occur. Or, we can get involved in fraud detection and help you determine how much you have lost after a fraud has occurred. We prefer to get involved in prevention. Wouldn’t you prefer it that way too?
Are your internal controls solid? If you have any questions or concerns regarding your internal controls, fill in the form below and we will be in touch.