How Do Accountants Deter Fraud?
The fall-out of business fraud is costly, and you should do everything possible to protect yourself and your company. According to the Association of Certified Fraud Examiners (ACFE), fraud causes a typical business an average of 5% revenue loss annually, equating to $4 million globally.
Some of the standard types of business fraud include:
- Misappropriation of assets
- Fake invoices, payments, and billing
- Financial statement fraud
- Employee-to-employee identify theft
- Digital Fraud
- Workers’ Compensation Fraud
Your front line of defense is your accounting team! They are the often-unsung heroes there to protect your company from fraud.
How Do They Help?
A pattern of careful and correct financial data brings discrepancies to light, thus increasing the chance of exposure and discouraging theft.
Checks and Balances
Sound accounting principles include creating a system of checks and balances. For example, no one person has control over the entirety of a single financial transaction – establishing accountability, which is a considerable safeguard against fraud.
An effective accounting team helps keep tabs on the company’s assets, as well as the value and use of those assets. Without this careful and detailed awareness, the opportunity for theft is much less prevalent.
Audits are a key factor in detecting internal fraud. Both internal and external audits verify the reliability of financial reports, inventory, and other assets in conjunction with the law and relevant regulations.
While every accountant is alert to fraudulent dealings, several different roles focus on detecting and stopping fraud.
Financial Statement Auditor
Financial statement auditors gather and analyze data to determine if there has been a misappropriation of assets or financial statement fraud. Their primary concern is determining the extent of fraud on the company’s financial health. Usually, financial statement auditors are external, which means they can offer objective insights.
Rather than finding the extent of existent fraud, internal auditors focus on preventing fraud from occurring. Typically, an in-house employee assesses systems and processes, watching for suspicious transactions. They then create procedures that help companies meet their financial goals and protect them from embezzlement.
Working on behalf of a government agent, such as the IRS, tax auditors confirm that an organization is not underreporting its income in an attempt to lower its tax liabilities. Unfortunately, tax fraud is common, and billions of fraudulent dollars are reported annually.
Forensic accountants step up to the plate upon fraud discovery. They prepare evidence and data for the legal trial that usually follows. They also work in the public sector (i.e., law enforcement) by tracing illegal financial activity.
If you’re looking for help in attracting top-tier talent to add to your accounting team, reach out to us at The Robert Joseph Group. We will send you the talent you are looking for with the highest degrees of professionalism and expertise. Contact us today!