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Has your organization gone “fraud-blind”?

Posted by Jerry Murray, CPA, CFE on Apr 1, 2017 2:37:07 PM

You’ve probably heard the old saying “out-of-sight, out-of-mind”...that saying has no better fit than when you ask yourself, “is my company fraud-blind?”

Fraud in most companies is much like a serious disease in the body. At first it’s not noticeable but eventually it grows to a point that when it presents itself, it’s a frightening development.

Because fraud does not cause you pain every day, it’s easy to occupy yourself with other more pressing matters and put fraud prevention on the back burner called “someday.” Well, don’t forget, “someday” happens to someone…every day. 

Here are some very common fraud schemes that can be going on in your business right now.

  1. If you have a business where cash changes hands as sales and collections, then you are susceptible to someone skimming the cash payment and never recording the sale.
  1. If you have employees who turn in expense reports, you have the potential for fraudulent or inflated expenses being claimed for reimbursement.

Expense reports are the first places I look for fraud in a company….and do you know why?  Because if employees are willing to steal nickels and dimes from you on an expense report then they have already proven to you, and me, that when motive and opportunity present themselves they can rationalize why it’s alright to steal from your company;  and it stands to reason that if they will steal small dollars, they will in all likelihood steal bigger dollars if given the opportunity.

  1. If you have someone who can create and sign checks you are vulnerable to a number of frauds such as “false maker.”

A “false maker” scheme is simple. The employee makes the actual check payable to themselves, other fraudsters, or they will pay a personal bill like a credit card, and then alter the payee’s name in the accounting records to make the disbursement appear to be made to a legitimate, authorized vendor.

  1. If you have payroll, then your company is vulnerable to schemes such as inflated hours worked, unauthorized adjustments to pay rates or “ghost” employees.
  1. If you have vendors/suppliers then you can be a victim of “shell companies” or falsified invoices. For example, if you have an employee who is in charge of purchasing and receiving, that individual could set up a shell or false company, submit invoices for approval from this shell company and receive the payments.

An effective anti-fraud program includes strong internal controls to mitigate the types of risks discussed above. It also includes educating all of your employees, your customers and your suppliers about the risk of fraud and your company’s position and focus on ethical behavior at all ranks both inside and outside of the organization.

Why wait to become a victim of fraud in your organization. Contact Goldin Peiser & Peiser today to get started building towards a stronger fraud-resistant organization. Jerry Murray is the firm’s professional on all issues relating to fraud and forensic accounting. Over the years, Jerry has proven to be truly instrumental to his clients’ success. In one particular instance, he helped uncover a 2 million dollar embezzlement scheme, allowing the company to respond in time to avoid more extensive losses.

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.


Topics: General Business, Fraud