Fraud Checklist

Let’s face it – there are  too many instances of fraud in the workplace.  Many times after the fraud is exposed, the money is gone with no chance of getting it back.  Someone who steals usually isn’t someone who saves and invests.

In the following list are suggestions that a business can do to protect itself and strengthen internal controls.  If you are the person in charge of the accounting records, you need to make sure these items are in place protect both you and your company and validate your integrity.

By not insisting on controls like these, you are doing a disservice to your employer, peers, investors, etc..

  • Dual signature checks – it is your financial institution’ responsibility to know who the signer(s)/authorized parties on your account are but this is not foolproof.  This might not stop someone who is determined to commit fraud but if everyone knows a second party is required to sign all checks on a regular basis, it will tighten up the cash disbursement process.
  • ACH/EFT Blocks – if you don’t use/need these functions and they are enabled, ask your bank to disable them
  • List on the Wall – never, never, EVER leave a list of you bank accounts out for anyone to see including credit card numbers. Such a list should be secured, locked up and available only to those parties who need access to it.  If you have an electronic list, it should be password protected.  If someone gains access to his information, even your cleaning crew, you could have a big problem.
  • Quality checks and printers – MICR coding must be done by a reputable printing company or on a high quality printer (if printed in your office on blank check stock.  Consider using chemically and/or photo reactive checks, they are much harder to duplicate/replicate.
  • Reconcile Bank Accounts monthly – with today’s access to online banking, you do NOT have to wait until the bank statement comes to reconcile the account(s).  The person who does the reconciliation should NOT be the one who writes the checks.  This is called “separation of duties” and is vitally important in your company’s internal controls.  Most transactions in a business flow through the bank account(s) making the bank reconciliation a powerful tool.  If bank reconciliations are not being done properly, not timely or not at all – this needs to be corrected immediately!
  • Do a Walkabout – to use an Aussie term, do a walkabout in the accounting department.  If you find checks, bank or credit card statements in in-boxes, drawers,  on desks or even in the trash, you’re at risk.  These are critical documents that need to be secured and properly stored and processed.

Here are a few examples of things that could happen:

  • A receptionist opened mail from the bank which she was told not to do. The next time the account was reconciled (promptly upon receipt of the statement), there were $8,000 of transactions charged to the company by the receptionist – her name even showed on the transactions! She quit  shortly after this was discovered and the money was gone forever.
  • A client noticed a large and unusual check clearing his account. Someone got into his check stock (in an unlocked drawer) and stole a check from the middle of the stack. If he hadn’t been watching his bank account regularly, it could have been weeks or even months before he found out about the fraud. Fortunately, he got his money back from the bank, but it was not a simple process.
  • Several credit card account numbers had been stolen by cleaning company staff after hours. Employees had copies of company credit card statements on their desks pending completion of their expense reports. The company got their money back but all of the cards had to be re-issued and each of the fraudulent transactions had to be formally addressed in writing by the company.

I hope these ideas hit home.  If there is not a strong “control environment” in the organization, there is risk – risk that can easily be reduced.

If you are concerned about internal controls or possible fraud in your organization, please contact me by e-mail at or by phone at 704/651-2216.  I can help with this and many other aspects of your business.

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photo credit: Black Clipboard via photopin (license)

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