There is no doubt about it: Most fraud schemes in business are uncovered by accident, and usually not during a regular audit! In addition, the incidence of fraud is now so common that its occurrence is no longer remarkable, only its scale.

For those reasons, it is important that good internal controls be adopted wherever possible by every business. Any entity that fails to protect itself appropriately from fraud with strong controls should expect to become a victim of fraud, or rather, should expect to discover that it has been a victim of fraud.

What can a business owner do? Here are a few specific examples for just your bank accounts:

1. Obtain bonding on all employees that handle the deposits and/or disbursements of the company.
2. Have all bank statements go directly to you, open them and then scan the checks to see how they are signed, and the payee on them to see that it is a legitimate business expense.
3. Have a separation of duties for making bank deposits, reconciling the bank accounts, and tying the bank reconciliation into the company's general ledger.
4. Insist that all employees take regular and routine vacations --- especially those responsible for the company's finances.
5. All checks should be signed by someone other than the person responsible for the company's financial records and bank reconciliations. Preferably, this person would be the owner.

Finally yet importantly, consider a special engagement with our firm to perform a "risk assessment" of your procedures and allow us to make recommendations. We have members of our firm who have received specific training in this area so that we can offer this additional service to our clients.

Do not hesitate to contact us if you have questions about this topic or would like additional information about our internal control review engagement.