Tips for preventing accounting fraud
Lynne Munns of Version One explains the importance of document management in combating accounting fraud.
In the current economic climate, organisations are increasingly susceptible to internal fraud as much as external threats. It is therefore vital that staff are not provided with the means to easily commit fraud.
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..and for SMEs
There is no doubt that the risk of fraud is greater in the current environment. Clearly, most small businesses will not be able to have an all singing all dancing system for preventing fraud.
Whilst there may be business reasons for SMEs introducing a document management system, I think fraud prevention would not be the main driver for the decision.
I think the key thing for SMEs in regard to fraud prevention is:
1 Have regular management accounts which are reviewed and understood. This includes understanding whether the bank balance makes sense in regard to everything else happening in the business. (It also makes good business sense to do this).
2 To review and tighten transactional controls and segregation of duties WHERE PRACTICABLE. However most SMEs are likely to have some weaknesses in controls and it can be helpful to understand where these are.
3 Be aware that previously trustworthy employees can "turn" especially when faced with adversity.
Whilst SMEs may not have watertight fraud prevention measures, keeping an "ear to the ground" together with the above steps should help reduce the risk.
David Lewis
Camrose Consulting