Don’t get taken: Get a business fraud checkup!
The median loss due to occupational fraud is $160,000 ($231,000 for privately-held companies.) In a recent study, 42% of victims were privately-held companies, and almost 40% of those cases involved companies with less than 100 employees.
The vast majority of perpetrators had no prior record, and almost half the instances were detected only because management received a tip. Just 15% of cases were detected by management oversight. Over 90% of all occupational fraud involves the misappropriation of an employer’s assets (primarily cash), via the theft of cash receipts or the fraudulent disbursement of cash by check or other means.
In a recent case in Texas, an individual described as a “trusted employee” took over $14 million during a 12-year period. In a case discovered in 2009, a small school district in New Mexico lost over $3 million at the hands of a key employee. These types of losses are discovered frequently, and it is likely that even more go undetected.
Small and Mid-sized Business Lose Big
What we can take from this, is that small, privately-held companies are highly susceptible to becoming the victims of fraud, and particularly at the hands of their most trusted employees. We also know that the thieves are rarely caught by management oversight.
What To Do?
Small organizations can manage their fraud risks by designing, implementing and maintaining some relatively simple internal controls. CPA’s are trained in the design, implementation and maintenance of internal controls, and can suggest improvements to your processes to help you reduce your risk of sustaining these types of losses. We have designed a special Fraud Checkup for small and mid-sized businesses. The Fraud Checkup is inexpensive, and could save you thousands or even millions. Ask any member of your client service team for more information about the Fraud Checkup.
by Mitch Perry
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