Fraud prevention can be anchored around two guideposts - strong internal controls and a hotline. Internal controls are the single most effective measure to assist in deterring fraud. A hotline is the most effective method to detect fraud.
An internal control review can suggest cost effective ways to strengthen your internal controls. For most small businesses, common weaknesses are inadequate reviews of transactions and the lack of account reconciliations. We have assisted numerous governmental, nonprofit, and private industry clients in their design of efficient and effective internal control procedures to detect fraud timely, and to prevent fraud from occurring.
Most fraud is exposed as a result of tips and complaints by other employees. The 2009 Report to the Nation showed that fraud was much more likely to be detected by a tip than by more traditional methods such as internal audits. An interesting note is that in frauds committed by owners and executives, which are generally the most expensive, over half the cases were identified by a tip. The Report also found that having a hotline can reduce fraud losses significantly from a loss of $135,500 for organizations without a hotline, down to a median loss of $56,500 for organizations utilizing a hotline. Another interesting fact in the Report was the importance of the hotline being available to third parties such as vendors and customers.
We can provide ethics training and assist you in setting up a hotline. We offer a hotline service though an affiliated company. Please see the website at www.ethicshelpline.org. This website utilizes a confidential reporting process where an employee would provide information about a transaction. We would work with the company to research the alleged transgression and seek to improve the situation by identifying what has happened, why it happened and how to prevent it from happening again.
What if you think a fraud has already occurred? Russell CPAs has performed forensic fraud auditing services and provided expert witness testimony in a variety of engagements, such as those listed below: