3 Real Cases Of Fraud And How To Avoid Falling Victim To Them

Many business owners that work with an outsourced accounting firm like ours will probably tell you they did it to save themselves the time and inconvenience of handling it themselves or saving on the cost it would take to hire someone to do it internally. But the benefits of doing so stretch far beyond those listed above.

One of the more important perks of an outsourced accounting function is the automatic layer of protection it provides against fraud. By upgrading your accounting function to an outsourced solution, you’ll get internal controls and innovative, fraud-proof accounting tools (like bill.com) that will give you peace of mind knowing your company won’t fall victim to crimes like these, as first outlined the August issue of the Journal of Accountancy:

Fraud Example No. 1: Employee embezzles money from trust fund for which he is the only trustee and then sets up a Ponzi scheme to draw out even more fraudulent funds.

Solutions

• Implement internal controls like two-signature checks
• Don’t allow any individual to have the only set of eyes on a bank account
• Be wary of sudden lifestyle upgrades among employees

Fraud Example No. 2: A single person serves as a manager of two companies and makes unauthorized payments from one company to the other in an effort to improve cash flow at the latter. The perpetrator altered financial statements and gave gifts to external auditors to cover up the fraud.

Solutions

• Your board of directors should always inspect financial statements for signs of controllership fraud
• External auditors should never accept gifts or allow the auditing process to be delayed

Fraud Example No. 3: Internal accountants were told to keep a failed loan off financial statements. No one stepped forward to report the statements had been falsified, and the perpetrator was allowed to overstate assets and understate liabilities on later statements.

Solutions

• Encourage internal accountants to report suspicious financial activities from the start
• Give them access to a fraud hotline to make it easier for them to do so. This person should not be the boss, but an outside party such as a board member.

Are your fraud-busting measures strong enough? Find out by talking to one of our experienced financial services and accounting specialists today.