4.12.11

Business owners sometimes ask us – if someone wanted to steal from me, how would they do it?

Here are some startling statistics, from fraud survey results and the Association of Certified Fraud Examiners:

•    86% of organizations report that they have experienced fraud in previous 10 years
•    43% report “significant” fraud in previous 2 years
•    The median loss from occupational fraud is $160,000
•    Small businesses (organizations with < 100 employees) are hit hardest – 31% of all fraud, and the median loss is $155,000

How is it done?
•    Most occupational fraud happens around the Accounts Payable/Cash Disbursement cycle (billing schemes, fraudulent cash disbursements, check fraud)
•    Revenue skimming, AR collections, cash funds
•    Theft or misuse of non-cash assets (inventory, supplies, other)
•    Expense reimbursement fraud is very common, but median loss is smaller ($25,000)

What can you do to prevent or minimize?

There are common internal controls that help prevent and minimize the amount of fraud and the duration, but internal controls alone are not enough.  Smaller organizations often don’t have the resources to put extensive internal controls in place, so they should concentrate on implementing anti-fraud measurements that have the biggest pay-off.  Most fraud is caught by accident or by tip, so anonymous hotlines can be very effective, and employee training and education on how to detect and how to report questionable activity is crucial.  A good practice to follow is to establish a company fraud policy so that employees understand your expectations and have a process to follow should they have any concerns about internal controls or suspect fraud in the company.

What can Apple Growth Partners do to help?

We can assist you with improving internal controls and provide you with information on inexpensive anti-fraud measures you can take.  We also use data extraction software to help detect fraud that may have occurred.  With data extraction, we can quickly and easily “mine” and analyze large volumes of your company’s data and identify anomalies that may indicate fraud.  We typically focus on cash disbursements, as that is where fraud most often occurs, but we can also investigate any other areas where you may have specific concerns.

How do you get started?

Contact me or a member of the assurance team at Apple Growth Partners. In addition to our audit specialists who are trained in data extraction and analysis, we have experts in fraud examination and forensic accounting who can work with you on specific instances of suspected fraud.