An organization’s culture that is overly trusting of its employees, does not consider fraud risks or value integrity, or is tolerant of fraud and abuse is a breeding ground for all forms of misconduct. 
 
The tone set by top management is key to communicate throughout the organization that they embrace integrity and a proper business judgement. The kinds of behavior that are permitted by the organization, how allegations of fraud and abuse are handled, and how positive corporate behavior is communicated and reinforced will have a substantial impact on the organization’s culture.
 
A 2018 Association of Certified Fraud Examiners' Report of the Nations on Occupational Fraud & Abuse estimates that the typical small business organization will lose 5 percent of annual revenue to fraud, with the median loss from a single case of occupational fraud being approximately $130,000.
 
Additionally, the report states that more than 22 percent of occupational fraud cases resulted in a loss of at least $1 million! Additionally, a fraud scheme’s median duration is typically 16 months before it is detected.
 
The costs of addressing the risks of fraud and misconduct are small when compared with the huge losses that can result from the misappropriation of assets. Fiscally responsible organizations should implement a combination of proactive measures to manage the risk of fraud and misconduct, such as developing and implementing a comprehensive fraud risk strategy and ethics programs.
 
Below are some considerations in mitigating the risks of fraud waste and abuse in organization:
 

Culture Values And Integrity

• Commitment by leadership
• Values statement
• Code of conduct
• Employee handbook describing permitted conduct
• Written security policy
• Effective management/board oversight
• Fraud awareness programs/training

 

Effective Human Resources And Personnel Policies

•  Employment/recruitment screening
•  Mandatory vacation policies
•  Employee evaluation/appraisal and counseling
•  Performance measures and monitoring
•  Employee attitude surveys

 

Fraud Risk Assessment

• Identification of fraud risk areas
• Common indicators
• Internal controls review and enhancements
• Segregation of duties evaluation
• Behavioral issues
• Control benchmarking

 

Effective Compliance And Governance Programs

• Documented standards and procedures
• Delegation due care with clear line of authority established
• Ethics training
• Monitoring and auditing
• Data mining and analysis
• Senior management/board oversight
• Enforcement and discipline
• Appropriate response

 

Investigation And Remediation

• Delineated misconduct reporting channels
• Establish anonymous “hotline”
• Whistleblower protections
• Investigative protocols
• Case management
• Remediation activities

 

How We Can Help

Adam Shay CPA, PLLC (“ASCPA”) professionals have a reputation for independence and professionalism combined with expertise that makes us highly qualified to provide forensic and investigative account services. ASCPA includes highly capable individuals with diverse and highly relevant experience, including certified public accountants, certified fraud examiners, forensic accountants, and former law enforcement personnel.
 
ASCPA’s professionals have assisted organizations develop robust fraud risk strategies and ethic programs for corporations, privately owned business, government agencies and not-for profits in various industries.
 
Drawing on this broad range of skill, ASCPA can provide a tailor-made plan to address the specific issues facing your organization. Equally important, we can help you effect change in your organization by providing recommendations and guidance to assist you in managing your risks and address the integrity of your organizations’ internal programs and processes.
 
For more information about Adam Shay CPA, PLLC, call (910) 256-3456 or visit us at www.adamshaycpa.com.

Adam Shay, CPA (NC License Number 35961), MBA, is managing partner of Adam Shay CPA, PLLC. Over the last several years, the firm has grown from a one-man shop to one of the largest firms in the Wilmington area. Adam focuses on minimizing taxes and improving the financial results of entrepreneurs. Those results are obtained by taking a proactive approach to all aspects of taxes and financials. Adam is actively involved in supporting the Wilmington entrepreneurial and startup community. He earned a Bachelor of Business Science in commerce from the University of Virginia and a Master of Business Administration (MBA) degree from the University of Maryland. During his spare time, Adam enjoys spending time with his two boys and wife, Sarah, as well as coaching and watching sports and spending time outdoors.