Is Your Business Vulnerable to Fraud? NJ CPA Firm Offers Steps for Protecting Your Profits

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Nick Magone, a partner with NJ CPA firm Couto, DeFranco & Magone, offers advice for businesses on preventing workplace fraud.

The ACFE report showed that tools like anonymous fraud hotlines, employee training, and surprise internal audits have a measurable impact on an organization's exposure to fraud.

Businesses of all sizes and types are vulnerable when it comes to fraud, according to the latest report from the Association of Certified Fraud Examiners (ACFE). In the ACFE's 2008 Report to the Nation on Occupational Fraud and Abuse, lack of adequate internal controls is the most commonly cited factor that allows fraud to occur.

And with many workers struggling to make ends meet, the situation is likely to worsen, according to Nick Magone, a partner with NJ CPA firm Couto, DeFranco & Magone.

"There is a variety of proactive steps businesses can take to protect themselves from fraud," says Magone. "By removing the temptation, you can shield your business as well your employees."

Occupational fraud schemes tend to be extremely costly, according to the ACFE report, with more than one quarter involving losses of at least $1 million. They also can continue for long periods without detection. The typical fraud in the ACFE study lasted two years.

Magone offers several common-sense tips for business owners and managers to protect their organizations from workplace theft:

  •     Restrict access to online banking functions and passwords. Set up a schedule to change passwords at the beginning of each month.
  •     Never leave unsigned check stock out in the open. Keep limited amounts on hand and do frequent checks for out-of-sequence or missing numbers. Require live signatures and avoid the use of signature stamps.
  •     For computer-generated checks, limit printing permissions to a few trusted employees. Again, change passwords frequently.
  •     Review bank statements carefully upon receipt. Examine returned checks or images for signs of altering. Question irregular transactions as soon as possible.
  •     Limit the use of corporate credit or ATM cards.
  •     Educate employees about fraud and the company's code of ethics. If you can't review every transaction, ask employees to be on the lookout for possible fraudulent behavior. Have a reporting process in place to protect whistleblowers.

Internal controls go a long way to minimizing your company's exposure, according to Magone. "The ACFE report showed that tools like anonymous fraud hotlines, employee training, and surprise internal audits have a measurable impact on an organization's exposure to fraud."

For information on implementing fraud measures like these across your organization, contact Couto, DeFranco & Magone at 973-325-3370.

Launched in 1992, NJ CPA firm Couto, DeFranco & Magone offers corporate tax planning and tax preparation, non-profit audits, cost certification services, and estate and tax planning to individuals, small businesses, privately held companies, non-profit organizations, religious and educational institutions, and professional services firms. Headquartered in West Orange, NJ, Couto, DeFranco & Magone also has offices in New York City.

For more information, call 973-325-3370 or visit http://www.cdmcpas.com.

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