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Risk Management Bulletin


By September 1, 2008July 2nd, 2021No Comments

Your business might well be a target for internal fraud. Fraud costs American businesses an estimated 7% of their annual revenues — and small businesses take an especially heavy hit, according to the latest Report to the Nation on Occupational Fraud & Abuse, based on 959 cases of occupational fraud investigated by Certified Fraud Examiners between January 2006 and February 2008. The most common scams among businesses with fewer than 100 employees were fraudulent billing and check tampering, with phony checks alone accounting for more than one out of four rip-offs (a far more common method of fraud than in larger organizations). To identify and curb fraud losses, The ACFE recommends these guidelines:

  • Be proactive. Establish and maintain internal controls to prevent and detect fraud. Adopt a code of ethics for management and employees. Set a tone at the top that your company won’t tolerate any unethical behavior.
  • Establish hiring procedures. Every company, regardless of size, can benefit from formal employment guidelines. When hiring staff, conduct thorough background investigations. Check educational, credit and employment history, as well as references. After hiring, incorporate evaluation employee compliance with company ethics and antifraud programs into regular performance reviews.
  • Train employees in fraud prevention. Are they aware of procedures for reporting suspicious activity by customers or co-workers? Do workers know the warning signs of fraud? Ensure that your staff know basic fraud prevention techniques.
  • Conduct regular audits. High-risk areas, such as financial or inventory departments, are obvious targets for routine audits. Surprise audits of those and all parts of the business are crucial. ACFE’s Fraud Prevention Check-up can help to identify fraud risks and establishing a strategy to prevent such losses.
  • Call in an expert. For most firms, fraud examination isn’t a core business component. When you suspect or discover fraud, enlist the anti-fraud expertise of a Certified Fraud Examiner (CFE).

You can download The Report to the Nation from the ACFE Web site: For more information on developing and managing a comprehensive fraud control program, feel free to contact one of our risk management professionals.