According to the Association of Certified Fraud Examiners, a typical fraud case costs the business 5% of its annual revenue. Many instances of fraud are not discovered until some time later due to a lack of internal audits that gives the employees committing the fraud a false sense of security. Your business may require fraud investigations if you notice any of the following signs occurring.
#1. Accounting reports are regularly not completed on time
Accounting reports that are rarely completed on time could indicate an employee is committing fraud, and using the delay to cover up his or her actions.
#2. Your profit margin is significantly lower than what you expected it to be
Just because your profit margin is slightly off doesn’t necessarily mean that someone is committing fraud. However, if it is significantly lower, there could be a problem, particularly if you haven’t had a sudden decrease in sales.
#3. There has been a sudden increase in balance sheet accounts
A common method of committing fraud involves creating “ghost” accounts for someone to funnel money into. If you notice a large number of new accounts, especially ones you cannot identify, this could be a sign that something is amiss.
#4. Certain transactions correspond with a particular employee’s schedule
Do you tend to have more returns whenever a certain employee is working? Do customers complain about past due notices after stating they have submitted payment to a particular individual? If unusual things seem to happen more often whenever a certain person is working, this may indicate you need to watch that individual a little closer.
#5. You have an employee who is possessive over his or her job duties
Your business could also be a victim of fraud if an employee regularly works long hours, never takes a vacation, and insists on handling all your accounting functions. Your employee may worry that if responsibilities are shared, he or she will no longer be able to perpetrate fraud, or that others will discover past misdeeds.