Fraud is on the rise in the business world and is something that every organization needs to consider. Fraud is a broad term, and there are many different types to be aware of, including identity theft, money laundering, asset misappropriation, and financial statement fraud. Fraud can involve those outside the business, causing harm, but it is often an internal threat that causes harm to the business. Therefore, it is vital that you know how to prevent fraud so that you can avoid financial losses, prevent IRS involvement and maintain your reputation. With this in mind, this post will offer a few tips for preventing fraud that should help.
Use A Formal Hiring Routine
As mentioned, fraud often results from an internal threat. This is why you need to have a formal hiring routine that involves a background check to ensure that there is no history of fraudulent behavior. This is particularly important for any staff that will be involved in managing payments and handling cash.
Look After Staff & Watch Out For Signs
Following this, you also need to keep an eye on staff to prevent fraud. Often, employees turn to fraud because they have financial difficulties or are unhappy at work. Therefore, you need to look after staff, ensure they have a healthy salary and encourage them to come forward if they have money problems. You should also watch out for signs of potential fraud, including withdrawing from work, trying to increase responsibility, and working independently and long hours. You also need to set up a reporting system so that people can anonymously report suspicious behavior.
Use SOX Controls
It is also important to use SOX controls to prevent fraud. The Sarbanes Oxley Act of 2002 is a federal law introduced to improve the reliability of financial reporting and prevent fraud. SOX controls can be used to prevent fraud and ensure companies. There are several examples of SOX controls that can be used, including access control, change management, and cybersecurity solutions. It is important to note that no specific controls must be used, so a business must decide on its own controls to ensure compliance. Regular compliance audits must also be carried out regularly to ensure that controls are in place and working properly.
Another intelligent way to prevent internal fraud is to segregate duties, especially duties involving financial management. Fraud can go unnoticed when you have one person responsible for any duties, so having two or more employees managing bookkeeping functions and interchanging these tasks can prevent fraud from becoming an issue.
Check Accounts Regularly
It is also a good idea to review your business accounts regularly to look out for irregularities. The more frequently you do this, the easier it becomes to spot fraudulent behavior and also take action to resolve the issue. Additionally, when the staff knows that accounts are checked regularly, you will also deter fraud.
Fraud is a serious threat to businesses, and these are a few of the best strategies to prevent fraud and keep everything running smoothly.