Six Steps to Avoid Fraud

Antiques shops and dealers must always be on the alert for fraud. It is a fact of doing business. This is even truer in this time of staggering job losses and deepening recession.

Last August, the Association of Certified Fraud Examiners (ACFE) reported the results of its survey on occupational fraud and abuse. According to its findings, U.S. organizations lost 7 percent of their annual revenue to fraud! How sad.

The study found that check tampering and fraudulent billing were the most common small-business scams. Check tampering accounted for a quarter of small-business frauds, making it much more common than in larger organizations. Check tampering commonly occurs in situations where duties related to the cash-disbursements function are not separated. No one person should be in of charge of okaying payments, signing checks, recording payments and reconciling bank statements.

Ways to stop fraud

We recommend that small businesses take several steps to identify and prevent fraud that can add up to big losses. These steps are:

1) Instituting internal controls to prevent and detect fraud.

2) Fostering a company culture that does not tolerate unethical behavior.

3) Developing and distributing a written code of ethics for management and employees.

4) Training employees in fraud prevention. This would include teaching them the tell-tale patterns and signs of fraud.

5) Setting up procedures for reporting suspicious activity by customers and co-workers.

6) Regularly reviewing high-risk areas such as bank statements and inventory.

Everyone in the company should learn preventative techniques. After all, everyone from the stock boy to owner is harmed when a company loses money because of theft.

Unfortunately, we are in a deep and long recession. I expect to see an increase in small-business fraud.

– Jim Sturgill is a director of WorthPoint and founding partner of Sturgill & Associates LLP, a D.C. and Baltimore area CPA firm.

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