To protect your business against asset fraud (including misappropriation) it is important to implement procedures and internal controls. Here are a few we suggest using, at minimum:
1. Screen and monitor your employees
It is important to conduct background checks on key employees, especially those who have cash handling and record keeping responsibilities. Once hired, it is important to monitor these employees for changes in lifestyle (i.e. expensive cars and homes) or evidence of substance abuse and gambling habits.
2. Implement internal controls
Segregation of duties is an imperative preventative measure at the core of a strong system of internal control. This prevents one individual from having system access enabling full-cycle transactions (processing across an entire accounting cycle without proper checks and balances—i.e. writing a check, cashing it, balancing the books).
3. Lead by Example
“Tone at the Top” is management’s leadership and commitment towards openness, honesty, integrity and ethical behavior. It is the most important component of the control environment.
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