Prior to the detection of fraud in a business, one must ideally try to prevent it. This article will focus on accounting and accounting auditor and their roles in the context of fraud prevention. We will not discuss the aspect of forensic accounting in this article.
Increasingly, accountants and auditors are in the front-line to detect and especially prevent corporate fraud. Since it is they who provide assurance on the data presented in the financial statements, they are well placed to detect problems related to internal controls, the company’s operations.
Although the work first accounting is not the detection of fraud but the audit of financial statements, it happens sometimes that they contribute to corporate fraud detection. Although there are no magic solutions to fraud, there are nevertheless several guidelines to prevent its onset. This is a continuous work and will be updated over time.
Prevention of Fraud in Company:
1. Internal Control
First, one of the mandates of accounting is to ensure that internal control in the company is adequate. By itself, an effective internal control and all it implies is a good solution for prevention of corporate fraud. Good segregation of duties in enterprise and good supervision on the part of superiors are two elements of internal control that are particularly important to prevent fraud in the lower hierarchical levels. Surprise inspections by the Audit Department is also a tool that can be used to detect fraud and to discourage employees who would have the idea to start the process of fraud in the company.
More specifically, checks at the signing checks, external and internal complaints, numbering and tracking of digital documents, outstanding checks and bank reconciliation will be effective in preventing fraud.
2. Employees Management in the Company
The motivational factors may be pushing to commit fraud. One can have financial pressures, intention to take revenge against the company or the lure of quick wealth. These pressures are everywhere in our society and it seems impossible to eliminate them completely. After all, they come from human qualities. It is the company’s responsibility to put in some mechanisms that will prevent fraudsters promptly exercise their actions.
One element that often makes a difference and helps mitigate the motivations for fraud is the strength of the corporate culture and respect of employees to managers and vice versa. If a professional relationship forged through respect or even a friendship binds employees of the company, it will be possible to prevent fraud more easily and simply prevent its onset in many cases. Transparency of managers and employees in their work and in their relationships towards each other is the key to preventing corporate fraud.