Professional bookkeeping best practices, such as segregation of duties, could have prevented these real-world cases of fraud.
My colleague George Stephen has published a list of bookkeeping best practices that allow business owners to proactively prevent fraud. These measures include instituting cash controls, segregating duties, conducting a thorough month-end close and review, eliminating paper checks and running regular audits.
I can't think of a better way to illustrate the value of George's excellent advice than by looking at three recent cases of fraud — and highlighting the steps a more proactive business owner might have taken to prevent them.
Case No 1: Credit Card Fraud
The scam: The bookkeeper at a Tennessee tractor repair firm illegally used the company credit card to make over 200 unauthorized purchases totaling over $21,000 in less than a year. Purchases included groceries and personal utility bills. Also, the bookkeeper added her daughter to the company's health-insurance policy without permission, which resulted in an additional loss of more than $3,000.