Did you know that perpetrators of "fraud" often record it "on the books." This means that with a little analytical observation, you may be able to spot suspicious activity shortly after it occurs.

Lets look at a common fraud scheme. Bob, your most trusted employee, has been working for you for many years in the accounting department. He has access to your signature stamp that is used to stamp checks, in lieu of you signing them. Unfortunately, Bob has experienced some personal financial difficulty. He, therefore, decides to take a "loan" from your company, but does not want to tell you. After all, he has worked for you for many years. He knows the company won't miss the money and he feels that he will "pay it back" sometime. To help himself with his financial difficulty, Bob hand writes a check to himself for $2,500 and uses the signature stamp to sign the check. He enters the check in the computer accounting system, but he shows the check is made out to your biggest vendor, ABC Supply Company. He charges the amount to Cost of Goods Sold on your income statement. Several weeks go by and Bob sees that no one has noticed. He now decides to do this again and over a period of time ends up taking $30,000 from your company.

Your CPA gives you monthly financial statements and you meet with him quarterly. Your CPA tells you that all is well. The bank accounts are reconciled and nothing out of the ordinary has come to your CPA's attention (after all this fraud occurred in relatively small increments over time).

What could you have done to possibly spot the fraud?
Most business owners get a false sense of security when their CPAs prepare financial statements and explain all is well. To help spot these types of schemes, we advise that you review a simple report on a monthly basis.

Have your accounting clerk print or prepare a report, in "vendor order," of every check written for the month. Have him or her tie the total disbursements on this report to the total disbursements on the monthly bank statements. Have the clerk give you this report, along with the bank statements at the end of each month.

By receiving this simple report you can quickly scan it to spot unusual occurrences. You can quickly spot vendors who received multiple checks, when they usually are only paid once per month. You can question payments to vendors that you are not familiar with. You can make sure that the report ties out to the bank statement. You can look at the bank statements to make sure there are no debits or electronic payment transfers that you are unfamiliar with.

It is quick and simple steps like these that The Whall Group can help you implement to take a proactive approach to preventing and discovering fraud. Contact us at info@whall.com for more information on how we can help your company.