Identifying fraud isn’t easy, people get clever, people have more and more playing room etc. For someone who doesn’t even think about fraud happening it’s considerably difficult to imagine schemes some might undertake to first off make fraud and then cover it up. Nonetheless there are some things you can do to identify fraud (or at least possibilities fraud taking place or places where potential fraud may occur (that is flaws in your processes):
- Have your physical stock counted on a regular basis.
It’s not only just physical stock and at least once a year, but also specific items that are more prone to be stolen for an example. The goods should be counted and differences followed up – why is there something more in stock or less than in accounting.
- Confirm balances, both payables and receivables
Thing is that differences surfacing from receivables may indicate potential fraudulent sales being recognized (for bonuses for an example) and from payables you may identify invoices being accounted that really didn’t exist. Against the invoice some might account also an expense and to get rid of the payable, they at some point take out money. It’s about making them at the right time.
And again, it’s not about all balances, but some based on amounts, risks etc.
- Reconciling bank statements to bank balance on the balance sheet
Have you really got that much money or is the accountant in fact stealing the money occasionally and at some point the balances are not matching? It’s about reconciling the company’s most important asset to accounts.
Surely you can think of another ways to identify fraud in your company but what’s most important is thinking about it. That’s half the work done!