Ten step guide to preventing and detecting fraud

Given the wide range of fraud that could be committed, what steps can you take to minimise the risk of fraud being perpetrated within your organisation? Consider our top ten tips for detecting and preventing fraud.

1. Begin by recruiting the right people to work in your organisation. Make sure that you check out references properly and ensure that any temporary staff are also vetted, particularly if they are to work in key areas.
   
   
2. Ensure that you have a clear policy that fraud will not be tolerated within the organisation and ensure that this is communicated to all staff.
   
   
3. Consider which areas of your organisation could be at risk, then plan and implement appropriate defences. Target the areas where most of your revenue comes from and where most of your costs lie. Develop some simple systems of internal control to defend these areas. Effective controls include:
   - segregating duties
   - accounting comparisons
   - supervision and review
   - authorisation and approval
   - arithmetical checks
   - physical controls and counts
   
   
4. Wherever possible don’t have only one person who is responsible for controlling an entire area of the organisation. This in particular includes the accounting function but will also include other key areas. For example ordering goods, stock control and despatch in a business where stocks include attractive consumer goods.
   
   
5. Always retain a degree of control over the key accounting functions of your business. Don’t pre-sign blank cheques other than in exceptional circumstances and ensure that the corresponding invoices are presented with the cheques.
   
   
6. Be on the lookout for unusual requests from staff involved in the accounting function.
   
   
7. Watch out for employees who are overly protective of their role - they may have something to hide. Similarly watch out for disaffected employees, who might be bearing a grudge or those whose circumstances change for the worse or inexplicably for the better!
   
   
8. Watch out for notable changes in cashflow when an employee is away from the office, on holiday for example. Similarly be aware of employees who never take their holiday. These could both be indicators of fraud, something we see when we look back retrospectively.
   
   
9. Prepare budgets and monthly management accounts and compare these against your actual results so that you are aware of variances. Taking prompt investigative action where variances arise could make all the difference by closing the window of opportunity afforded to fraudsters.
   
   
10. Where a fraudster is caught, make sure that appropriate action is taken and learn from the experience.