There is always a risk of fraud in any workplace, no matter what size or type of business, says #b#Tammy Hersh#/b#, a CPA and forensic accountant. But today’s economic climate makes the possibility of fraud even more likely.

“When perceived need and opportunity come together, that is when fraud becomes a greater possibility,” Hersh says. “Right now, perceived need is often great.”

The economic downturn means that many employees have not received raises, some for more than a year. Add to that the specter of cutbacks at many workplaces, the greater possibility that a spouse has been laid off, and the fact that cutbacks mean that fewer people doing more work also means fewer people supervising workers. It all adds up to a greater risk of fraud in every business.

Hersh, a senior manager in the litigation and valuation group in the Bridgewater office of Amper, Politziner and Mattia, will present “Fraud in the Workplace,” on Thursday, March 18, at 7:30 a.m. at the College of New Jersey. Cost: $10. Call 609-771-2947.

Hersh became interested in forensic accounting, which utilizes accounting, auditing, and investigative skills to examine a company’s financial records, after finding irregularities in accounts in her work as a CPA. “As an accountant if I found an irregularity I had to stop there and turn the records over to someone else. I wanted to be the one to go on to the next step,” she says.

Although “always good with numbers,” Hersh originally planned on a career in marketing. She graduated with a bachelor’s in marketing from Pace University. After working in the field at a bank for a few years she became more and more interested in the numbers side of the business. She returned to Pace for an MBA in accounting in 1996.

In nearly 15 years of accounting she has consulted and provided services in commercial litigations, business valuation matters, and fraud investigations. She has assisted numerous companies and attorneys with matters of employee theft, financial statement fraud, accounting malpractice and securities fraud, breach of contract, shareholder disputes, wrongful terminations, breach of fiduciary duty, non-compete disputes, and business interruptions.

Little big troubles. Every organization, large and small, needs to worry about fraud, Hersh says. While many owners of smaller businesses feel they are too small to worry about fraud, they are in fact the most likely to experience a problem. “They often have the highest amounts of money lost because they have the worst controls in place,” she says.

#b#Be aware of risk#/b#. Just because you know your employees well and feel they are like family does not mean that they cannot give in to temptation. “Train all of your staff about the risks of fraud and what they should look for,” says Hersh.

Understanding the signs of fraud is the first step to avoiding it — or if it has occurred, catching it before it becomes too great. The more people in your company who are aware of what to look for, the more protection you have.

Segregate duties. The more people who are involved in processes such as bookkeeping, payroll, and accounts receivable, the less likely it is for fraud to occur. The more staff you have doing different processes the more checks and balances there are in your accounting system, says Hersh. Unfortunately, this can be difficult to accomplish in a business with a very small staff.

#b#Be involved#/b#. No matter how busy, a business owner must take the time to know and understand the basics of the company’s financial records. Open the bank statements and take a look at them. Look at the canceled checks and the reconciliation statements. Make sure that you understand what money is going into your accounts and what money is going out, as well as where it is going to. Don’t just assume it is all being handled correctly by your bookkeeper or other staff.

“None of these things takes any great skill, they are all things that every person should be doing for their own personal bank statements,” Hersh says. “They also should be doing them for their business bank statements.”

A business owner will know the names of vendors and clients, she adds, and should make sure that the names on the checks that are written each month match those names. “If you see checks being sent to names you aren’t familiar with it is a warning sign that you need to start checking things out,” she says.

The reality is that most fraud is detected by accident when the owner does something out of the ordinary and takes a look at books that can go unnoticed.

#b#What to do#/b#? If you do suspect there is fraud in your company, the first step is to call an attorney. “You don’t want to make a mistake and put yourself in the situation of being sued by your employee. Employees do have rights, too,” Hersh says.

Your attorney will be able to recommend a forensic accountant who can look over all of your books and records and find any discrepancies. “A forensic accountant is trained to look beyond the statement and follow the cash. We are trained to know the high risk areas,” she says.

Remember that the best way to prevent fraud is to put the checks and balances in place before it happens. Being aware is your best defense.

Facebook Comments