There are three things In the world that deserve no mercy, hypocrisy, fraud, and tyranny – Frederick William Robertson. ” Business fraud can be commonly defined In terms of the use of a person’s occupation for personal gain or enrichment through the misuse of employing organization’s resources or assets. Currently, fraud is a pervasive problem throughout small and large companies. Failure to put in place fraud preventative procedures can put a company in financial jeopardy and optioning knowledge on current regulations along with implementing an effective read preventive system can mitigate fraud.
Both small and large businesses can be affected greatly by the impact of fraud. Typically, small business environments operate on lean operating margins. If they have a 10% loss of revenue, throughout a minuscule timeshare that can significantly weaken their profit margins. However large business environments, could possibly survive fiscal loss. Otherwise, their business endurance could be at risk and failure to address fraud Issues places a company at a competitive disadvantage. If the fraud incidents become public knowledge, the large company can damage the organization’s brand or reputation.
The Serbians-Solely Act of 2002 (SO) was in forced for all U. S. Public companies large or small and their auditors, to comply with. This legislation is arranged into eleven sections and introduced changes for stricter regulations of financial practice and corporate governance. Serbians-Solely Act of 2002 was named after Senator Paul Serbians and Representative Michael Solely, who were the main creators, which set numerous deadlines for compliance (Serbians-Solely, 2006). Even with the SO legislation being mandatory for all companies to follow.
Fraud s a preventive undertaking that companies have to independently monitor. Recent studies exemplify, small-business owners are victims of fraud at a rate of 15% more than the general population. Javelin Strategy ; Research’s 2011 Small Business Owners Identity Fraud Report found that in 2010, small businesses lost about $8 billion to fraud (Anderson, 2013). Businesses are encouraged to design and implement fraud prevention program phases by beginning with a vision for their program along with the strategic objectives.
The business along with their auditor must develop more effective internal controls to detect fraud. One of the first steps to preventing employee fraud Is letting the employee know that they are being watched. “Perception of detection Is a very powerful deterrent,” says John 6111, a certified fraud examiner and general council and director of self- study publications for the CAFE. Other steps that can be taken are: hiring the right internal control system and always have the check registers and bank account balancing in place.
Make sure that expenditures are approved by both management and someone in accounting. Monitor cash situations, like security cameras monitoring daily activities. From time-to-time conduct surprise audits; because the auditor has sampling and computer data analysis techniques that help uncover fraud. Surprisingly, research has proven that employees that do not take vacations can be a red flag. An employee could be afraid that someone may discover fraudulent transactions. Therefore, enforce mandatory vacations in order to aid in the prevention of fraud (Matthews, 2002).
If the business is small, they would benefit by separating the accounting duties. Generally, most small businesses rely on one person to execute several accounting responsibilities and this unrestricted access makes a business vulnerable to accounting fraud. In order to see if there are any unusual banking transactions. Have the company bank statements mailed to the business owner’s or official representative’s home or post office box, which gives them the first opportunity to review the statements in greater detail.
Most important for a small business to implement, is to not limit their focus on financial fraud. Some office positions have access to confidential information and trade secrets. That can be Just as damaging to a business as financial fraud. Try to enforce strict confidentiality procedures and proper disposal of all confidential documentation (California CPA Education Foundation, n. D. ). Business identity theft is another damaging type of fraud that can cause fiscal loss.
Stealing a business identity can happen in many ways. Both private businesses and government agencies are at risk, resulting in all businesses suffering the consequences. Modern day technology has made it possible for hackers to tap into state database systems or gain access into private company database systems. Creative thieves have used email “pushing” attacks, mallard and viruses to infiltrate computer systems. Once installed, these systems can record every keystroke; steal seer-names, passwords and bank account numbers.
The internet and advent of electronic funds transfer offers the opportunity for these crimes to transpire quickly, with perpetrators remaining concealed behind the anonymity of a fake internet protocol address. Therefore, data handling procedures is strongly recommended by information security professionals. To protect against external or internal threats, it’s vital to update virus protection, security software and utilize an effective antiperspirant, interrelate and security software. These systems need to be installed and kept up- o-date on all computer workstations and laptops.
