PROTECTING YOUR BUSINESS FROM FRAUD
Written on the 30 September 2015 by Stephen Greene
EVERY year in Australia, instances of fraud cost businesses hundreds of thousands of dollars, and these are only the ones we know about.
Using Company credit cards for personal expenditure
The use of company credit cards for personal expenditure is particularly difficult to detect if appropriate controls aren't observed. In many businesses, cards are paid by direct debit and sometimes without review. If they are reviewed, it may be by an employee less senior than the card holder who is unwilling to contest certain expenditure items with their superiors. Some steps to negate the risk of credit card fraud include implementing a robust review process which reconciles items back to a valid invoice or receipt, devising an enforceable company credit card policy and ensuring senior management is responsible for the review and ultimate approval of expenditure.
Misappropriation of stock can occur when businesses fail to employ strong stock controls, allowing employees to take inventory without detection. It is especially common in industries with relatively high volume, low individual value inventory, such as clothing and other retail stock. To combat this, businesses may perform regular stock counts, invest in security controls such as CCTV, and take an active stance in the investigation of any discrepancies between inventory systems and actual stock counts.
Cash and bank controls
Typically smaller businesses allow for only one bank signatory to release bank funds - in most cases the in-house accountant - who may also be responsible for the majority of other finance functions too. The opportunity therefore arises for the misappropriation of funds without fear of review. It is prudent for businesses to ensure segregation of duties between the reconciliation of accounting ledgers and the payment of expenditure and wages, and to ensure all bank accounts require two separate authorisations preferably at senior management level or above.
Payroll issues arise in SMEs largely due to a lack of control. Preparers of payroll may have full autonomy to change employee bank details, create new employees or amend their own pay making it relatively easy to put through falsified payroll payments. Businesses wishing to lessen the risk of payroll fraud should endeavour to ensure any changes to employee details are subject to a secondary review, and that senior management are responsible for reviewing both pay runs and pay variance reports, with an eye to identifying any large or unusual movements.
Author: Stephen Greene
About: Stephen Greene is the Audit Manager at MGI South Queensland and has experience in audit and assurance both here in Australia and across Europe. Stephen has worked with a range of businesses to assist them to improve their audit procedures, specialising in implementing processes to detect and deter fraud.