In Business
Top Ten Tips in Preventing Fraud in your Organisation
By Emma Cadden, Manager, Corporate Finance Department, FGS Partnership ,
Jul 6, 2010 - 11:12:22 AM

Top Ten Tips in Preventing Fraud in your Organisation

The suspicion of fraud in a company is a stressful and delicate matter.  It is important to protect you and your employees from the impact of a fraud in your organisation.  Processes and procedures can be put in place to help reduce the instance of fraud.  Some of the key controls are:

1. People Control - Recruit the right people by selecting an individual with appropriate skills and training.  The importance of reference checks for training and employment is important to ensure they are the right person for the job and not putting themselves in a position to exploit your organisation.
2. Risk Register - Identify your businesses risk areas by maintaining a risk register which will enable you to identify the areas most at risk in your organisation.  The company’s policies and procedures can then be specific to these areas.
3. Accounting Controls - Policies and procedures should be established in relation to accounting controls.  It should be clear from the policies and culture that fraud will not be tolerated in the organisation. These should be communicated to staff.  
4. Segregation of duties – It is more difficult for an individual to commit a fraud if they are not involved in all steps in a process, e.g. posting sales, counting cash and lodging cash.  If the duties in a process can be segregated this can help reduce this issue.  While small organisations may find this difficult even the involvement of a second person in a process can be beneficial.
5. IT Controls – Each staff member should only have access to the info rmation required for them to carry out their duties and changes to a posting should only be possible by the authorisation of a more senior employee. This access should be password protected which is changed regularly.
6. Information Controls - Dispose confidential info rmation safely.  A policy should exist for the storage and disposal of confidential info rmation to avoid unauthorised access. 
7. Budgets and Monthly Controls - The preparation of budgets and the comparison of actual results to budgeted results can give a quick indication of any variances from the expected performance of the business.  These variances should be explained to ensure no unusual transactions are missed.
8. Timely Reconciliation Controls – Being familiar with the transactions going through the bank statements and checking the reconciliation of each bank account will help to identify unusual transactions.  This is more practical in a small organisation but can be assigned to staff where segregation of duties exists in larger organisations.
9. Sequential numbering – To assist the easy identification of any missing invoices or cheques these documents should have sequential numbering which is used when they are being issued.  Any gaps in the numbering should be reported to the relevant line manager and an explanation provided.
10. Reporting and Authorisation Controls – Reporting lines should exist between staff and should be clearly documented and communicated to staff.  Furthermore, in larger organsiations with an internal audit function, this department should have a direct reporting route to the audit committee.  Authorisation controls can be implemented by allowing certain staff levels authorise purchases and payments.  The more money in question the higher the level and number of individuals that should be involved in the process of authorisation, e.g two cheque signatories on cheques in excess of €1,000.

The above points are intended for information and guidance use only.  If your company is affected by any of the issues outlined above independent financial advice should be sought.

Emma Cadden is a Manager in our Corporate Finance Department. She is located at our Dublin office:

t: +353 (0) 1 418 2000

e: emma.cadden@fgspartnership.com