Fraud Prevention: Make It an Ongoing Conversation

Is fraud prevention a part of your organization’s ongoing conversation regarding your mission, vision, and goals? If it isn’t, it should be, but unfortunately for most organizations it’s an afterthought. Fraud prevention should be a common thought in organizational meetings. Proper planning will save you valuable time and organization heartache in the future.

An organization who doesn’t integrate fraud prevention with every aspect of their organization’s growth will find they are battling fraud loopholes or areas where an employee could take advantage of the situation to his or her personal gain. The conversation regarding fraud prevention can be simple or difficult at times, but when it is common place, it makes it easier for all involved. The plan for the fraud prevention effort must then be communicated clearly throughout the business. The outcome of proper planning will be efficiency and effectiveness. Both are needed for fraud prevention to be successful.

Below are some statements and questions to start the conversation in your organization:

• Fraud prevention has value. What is it for your organization?
• Do you understand how the fraud prevention role fits in your organization?
• What is fraud prevention’s role in helping achieve your organization’s goals?
• How will you manage fraud prevention expectations?
• How will your organization evolve with the continual changes necessary to prevent fraud?

Are all fraud prevention ideas looked at from a point of cost, benefit, and risk and then decided on?

• Cost (spend/funding)
• Benefit (business value)
• Risk (assessment/tolerance)

Organizations taking fraud prevention serious know their fraud risks. Does your organization know their risks and either mitigate or accept them? Organizations that are determined to prevent fraud often have risk assessments done on a regular basis in different areas of their organization. Larger organizations will have full-time staff that conduct these risk assessments while small to midsize organizations may hire a third party. Regardless of who does the risk assessment, this is a great place to start your prevention activities. When conducting these types of risk assessments, I have found that management usually has a good idea of where we should start and it is usually what makes management stay up at night. That area may be inventory, accounts payable, employee expenses, credit cards, accounts payable, or another area. Risk assessments are a low cost preventive measure when compared with the monetary loss and the public relation nightmare of an actual fraud.

After reading that last paragraph, you may ask yourself why all companies don’t take the preventative first step of a fraud risk assessment. Here are some of the reasons I have heard:

• We are a mid-size business and my immediate family run it. My family won’t steal from me.
• My employees are trusted and have been here for over 20 years.
• If I never have a fraud, I wasted my money on a fraud risk assessment.

Unfortunately, it is far too common to have long-term trusted employees, family or not, be the fraudster. We need to treat employees with respect but also trust and verify.

If your organization would like to continue a discussion on this topic or other fraud related topics, please email David Hammarberg, Principal and leader of our firm’s Forensic Services and Information Technology Consulting practices at dhammarberg@macpas.com.