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Business Fraud: Prevention Strategies, Key Indicators to Lookout For

Posted by Ryan Hintenach on Tue, Jul 24, 2018

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Concept of accusation guilty businesswoman person. Side profile sad upset woman looking down many fingers pointing at her isolated grey office background. Human face expression emotion feelingIn March, the Lehigh Valley’s GDP hit a record $39 billion. This is fantastic economic news for the Lehigh Valley, but it should be a warning to business leaders to continue to monitor their business environments. In times where business is booming, it’s human nature to take the foot off the gas and allow items to slip through, creating cracks that can turn into gaping holes if left unattended.

Fraud prevention is vital to any organization. The 2018 Association of Certified Fraud Examiners Report to the Nations noted the median loss in business with less than 100 employees was about $200,000, while those with more than 100 employees was about $104,000.

Many of those cases – 46% – were detected by accident or tips. Only 27% of these occupational fraud cases were detected by management review or internal audit. It’s best to be proactive and mend those cracks by paying attention to key fraud indicators and implementing strategies to protect your investments.

Many key indicators to fraud are easy to detect if you have good controls in place and you catch the issues early. Knowing your numbers, your business, and your employees are a necessity.

A few key indicators to keep an eye out for include:

  • Lack of controls
  • Failure to have or poorly written policies and procedures
  • High turnover rate
  • Key employees never taking time off
  • Missing records
  • Overuse or abuse of journal entries
  • Lagging receivables
  • Unusual increase in capitalized assets
  • Purchases beyond necessity


Generally, fraud is more likely to occur in an organization if there is an opportunity (insufficient controls), rationalization (I deserve a raise, I’ll give it back, it’s a loan, etc.), and pressure (personal financial pressure, legal problems, etc.). These three items in combination allow a fraud to occur. Consider the fraud triangle as a top level starting point to looking at holes in your organization to identify where your largest risks are and put a proactive plan in place to mitigate those risks.

READ MORE: Fraud Prevention & Protection: Five Strategies for Your Business

There are three preventative items that are low hanging fruit to fraud prevention. Many leaders say they know their people, have a zero tolerance policy, and have controls in place. Many times the controls they believe are in place are implemented by those few key employees that the employer thinks they know.

Know your People

One of the easiest things a business owner can do is have continuous conversations with their people to identify their traits and their tendencies. Hiring practices are in place to find the right person that fits the business culture beyond qualifications. Listen to and observe your employees as this may reveal cracks that need patching.

Educate your Employees

Employees are used to seeing fraud occurrences such as a stolen credit card or identity theft, but are generally shocked when a trusted bookkeeper of 20 plus years has skimmed $200,000 over the last five years.  Make your employees aware of your fraud risk policy, types of fraud, and the consequences that are associated with them. Make it personal and show that it affects them – if one of our own steals from us, we may have to downsize. If you educate your employees, you may find that honest employees start asking questions when things look out of character for other individuals within the organization, and they may uncover issues sooner.

Implement Internal Controls

Internal controls are implemented to safeguard company assets, ensure integrity, and deter fraud and theft. Segregation of duties is a key component to internal controls and there is a cost benefit to implementing each control. As you consider implementing controls, consider the highest risk areas first, then build from there based on your internal risk assessment. Once you have identified the controls that make sense for your organization to implement, document them, train the employees, and review them at least annually to ensure they are working as intended.

Concannon Miller consults with companies on deterring fraud as well as detection and investigation into suspected fraud. We can aid your company in preventing fraud through internal control reviews and fraud prevention practices. Read more here or contact Certified Fraud Examiner Ryan Hintenach at rhintenach@concannonmiller.com for more assistance. 

Topics: Fraud

Concannon Miller’s unique, holistic and intimate approach to financial health sets us apart from smaller CPA firms with more limited resources as well as mega firms where mid-sized clients struggle for attention. Contact us here to talk about improving your business.

This communication is designed to provide accurate and authoritative information in regard to the subject matter covered at the time it was published. However, the general information herein is not intended to be nor should it be treated as tax, legal, or accounting advice. Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented. This information is not intended to be nor can it be used by any taxpayer for the purposes of avoiding tax penalties.

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