Effective Internal Controls to Prevent and Detect Frauds

Do you know, on an average, an organization loses its 5% revenue each year due to fraud, and many of the firms are still unaware that they are actually victims of frauds. It has been found some organizations have implemented anti-fraud strategies like outsource accounting, etc., mentioned in this presentation, which has ultimately faced lower losses as compared to those who are lacking in these controls. Read this pdf and apply appropriate strategy to prevent and detect fraud.

Transcript

1. Effective Internal Controls to Prevent and Detect Frauds Accounting To Taxes
2. Most of the businesses refrain from admitting that they’re unsafe from fraud occurrences.
3. S U R V EY However, according to the ACFE report, every year businesses lose 5% of their revenue on account of frauds. 5% may seem to be very less, but on a global scale, it comes out to be approximately $3.7 trillion. The majority of businesses fail in the first 5 years of initiation due to inadequate management of internal frauds.
4. How to Prevent Business Frauds? Implement these strategies to detect and prevent frauds and secure your business:
5. 01 HAVE ONLY ONE PERSON WHO CONTROLS ALL FINANCIAL ASPECTS Only authorized personcanpurchase anddisbursethe amount Separate handling of depositsandreceipts Purchasingfunctions shouldbeseparated frompayable functions A supervisorneedsto approve the employee’s timesheet before payroll preparation Paycheckshouldbedistributedbyanother person,not the samewho preparesthepayrollor signsthechecks.
6. 02 RECONCILIATION OF ACCOUNTS Agency accountreconciliation shouldbedonebyan independent person, not the same who is handling bookkeeping or signingchecks. Examinethecanceledchecks andkeeptrack of the vendors. Toensure checks arenotoutof sequence, examine bank statements andcanceledchecks.
7. 03 RESTRICT USERS ON USAGE OF BUSINESS CREDIT CARDS Restrict the personaluseof credit cards Limityouraccountwith credit card companiesor vendors Update youremployeesaboutthe usageof thecard and thetypeof purchases that canbedone. Make it mandatory to submit genuinereceipts for all purchases Everymonthensure to examine the credit card transactions with correspondingreceipts.
8. 04 REGULARLY ANALYZE FINANCIAL ACTIVITIES Compare actual revenue andexpenses Check explanationof variation inbudgeted amount,if any Review the check register and general ledger regularly Have an independent employee/auditor to explain financial statements to management Opt for outsource accountingservicestoget reportsfrom offshore experts who have no biased interest in your business.
9. 05 SECURE YOUR PETTY AND OTHER CASH FUNDS Limitthenumberof employeesto accesspetty cash Keep cashin the locked drawers Restrict the petty cash replenishment amount to an amount that requires to bereplenished everymonth. Keep late fundsseparate frompetty cashfunds
10. 06 PROTECTING CASH AND CHECKS AGAINST MISUSE With nodelay, keeptherecordof checkswhen received in their original form. Use numbered receipt book to issue a receipt of cash. Maintain appropriate documentationlike cashreceipts, receipts book,etc.
11. 07 COMPANY ASSETS Make a policy that only after the signature of an authorized person,the employeescanusethecompany’s assets. Make surecompany assetsareusedfor onlyoffice purpose. Maintain vehicle logbookthat includes trip purpose, odometer , driver name,date, etc. Maintain arecordof equipment/inventory. An authoritative personmustcheckthe logbook periodically.
12. ACFE reports that 3% frauds are detected with external audits and 42% with hotlines, out of which 80% are fraud cases. REPORT
13. If you are still not sure regarding what anti- fraud measures will work for you, then seek help of an anti-fraud consultant or outsource your accounting processes to offshore experts. There operations and reports are not influenced by your internal employees, which would ultimately help your business to succeed without chances of frauds.
14. Looking for Accounting Experts? Accounting To Taxes (ATT) has been providing reliable and cost-effective accounting services to numerous fortune 500 to SMBs worldwide. Get afree initial consultation with one of ourexperts.
15. +1 646 688 2821 info@accountingtotaxes.com www.accountingtotaxes.com CONTACT US