How Small Business Owners Can Prevent Financial Statement Fraud?

How Small Business Owners Can Prevent Financial Statement Fraud?

Fraud. This is every businessman’s nightmare. To run a company requires a lot of energy and hard work. It is ironical yet true that most business owners do not have the time to constantly keep a check their company’s accounts. At such times, companies become vulnerable to fraud. But don’t worry. While reports of frauds in companies are on the rise, here are 3 ways how you can save your company from a similar scenario:

 

#1: Training of Management

The management should be trained to keep an eye out for indicators that a person might commit fraud. Just like prevention is better than cure, managers should be alert and keep a look out as to whether a person is more prone to committing fraud. Some main indicators include when a person is under situational or financial pressure, when the opportunity for fraud provides itself and when someone easily rationalises fraud among others.

 

#2: Segregate Accounting Functions

Dividing the accounting duties among a number of people reduces the opportunity for a single person to commit fraud. In the case of a fraud, this also helps pinpoint to a certain department/ employee while checking where and how the fraud was committed. The higher chances of getting caught may frighten or discourage anyone from executing a fraud.

 

#3: Get An Outside Auditor For Regular Auditing

Knowing that an outside authority is checking all financial records can deter employees from committing fraud. Experienced auditors can prove whether a company’s records are accurate and reliable or not. Also, regular auditing can detect any discrepancy in data much more easily than a once in a while check.

 

That’s it !

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