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10 WAYS TO AVOID CORPORATE FRAUD

Lock filing cabinets and use passwords

Published on Monday, Nov 26, 2007

Here are some tips provided by Ray Dunkle, an Akron certified public accountant with Brockman, Coats, Gedelian & Co. and a certified fraud examiner.
1 SET THE PROPER TONE
AT THE TOP

Be ethical and show that you're monitoring and paying attention.

''If you're running your business unethically, don't be surprised if someone returns the favor at some point,'' Dunkle said.
2 AWARENESS TRAINING

Bring someone in to talk about why people steal and the importance of reporting suspicious activity. ''The No. 1 way fraud is detected is through someone opening their mouth. Forty percent of fraud is through a tip,'' Dunkle said.
3 IMPLEMENT AN
ANTI-FRAUD POLICY

Let your employees know who they can turn to if they suspect fraud and make sure there is an ''anti-retribution'' clause to protect the employee coming forward with the information. Have at least two channels for people to report to. If it's the CEO who is doing the stealing, go to the board. If it's a privately owned business, go to other members of the family. If your boss is committing tax fraud, go to the IRS.

Also, protect the identity of the accused until you have adequate proof to present it to a prosecutor.
4 HAVE CHECKS
AND BALANCES

This is a very broad category, but make sure you look over your practices. Dunkle warns against allowing an employee to use a signature stamp for checks. Instead, have the person whose name is signing the checks either sign the checks or use an electronic system where he or she still reviews them.

When the mail comes, don't send checks directly to the accounting department before they've been endorsed ''For Deposit Only.''

Make sure to reconcile your bank accounts monthly; send statements to the owner first before the accounting department.

5 ESTABLISH A FRAUD HOT LINE OR
METHOD TO REPORT FRAUD

Offer a hot line that people can call or an anonymous box for tips. Dunkle suggests the hot line, which he said is not as expensive as business owners may think. He once had a $40 million company with 90 employees that was able to get a hot line that was staffed 24 hours a day for $2,000 to implement and $2,000 a year.

''I do tell companies, 'Don't try to man it yourself,''' Dunkle said. ''I don't want to call anonymously to the guy sitting next to me.'' Also, with a hot line, the staffer can keep a line of communication open with the anonymous person to possibly get more information — perhaps suggesting that person call back in two weeks.
6 DON'T RELY SOLELY ON YOUR-
SELF OR YOUR ACCOUNTANT

''There tends to be this perception that accountants are the financial police, that if my accountants are looking at my records every year, they're going to catch it,'' Dunkle said. What could be more effective is an internal audit or a surprise audit, he said.
7 DO BACKGROUND CHECKS ON NEW EMPLOYEES

Do a criminal background check, a credit check (to see if there's financial pressure on that person), a civil background check (to see if there are lawsuits) and a driving-record check. Dunkle said he wouldn't base a decision solely on a driving record, but studies have shown that fraudsters have worse driving records.
8 CONTROL PHYSICAL ACCESS

As obvious as this sounds, lock your filing cabinets and use passwords on computers. Too often, lax practices are used.
9 ESTABLISH JOB DESCRIPTIONS

''We all love the employees who go above and beyond the call of duty,'' Dunkle said. But sometimes a person who is defrauding a company may appear to be helpful, but they're trying to supersede access.

Require mandatory vacations, said Dunkle. ''A lot of times, when fraudsters are in control of the books, they don't want to take any time off because they're afraid when they do, the house of cards will fall down.''
10 PUNISH

A lot of times people want to sweep fraud under the rug, Dunkle said. ''They want it to go away. But if you don't punish, the next person that is tempted to steal recognizes that there aren't significant ramifications if you get caught,'' he said.

— Betty Lin-Fisher

Here are some tips provided by Ray Dunkle, an Akron certified public accountant with Brockman, Coats, Gedelian & Co. and a certified fraud examiner.
1 SET THE PROPER TONE
AT THE TOP

Get the full article here.


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