Fraud…Yes it can happen to you

by Larry Emmott on June 14, 2011

in Management,Security

We don’t like to think about these things but the fact is that dentists are all too often victimized by fraud. The following is from the e-newsletter of a CPA biking friend Peggy Ullmann.

…actually small businesses that are the most vulnerable and hardest hit by fraudulent schemes. On average, a typical fraud can last approximately 18 months to 2 years without being detected, and a business can lose hundreds of thousands of dollars.

There are three factors that contribute to an employee committing occupational fraud: incentive, opportunity, and rationalization. Given the current economic conditions, many people are having financial difficulties such as foreclosure, spousal unemployment, or unforeseen medical expenses. Each of these types of situations gives a person an incentive to look for a supplement to his or her income. Without having the proper internal controls in place within the business, a person may have the opportunity to commit a fraud, especially if he or she believes that no one is watching. Finally, he or she will rationalize the behavior. They will tell themselves that they are only borrowing the money or that they deserve a raise because they’ve been putting in extra time and effort.

Many small businesses have limited staff, so segregation of duties can be a challenge. However, there are a few simple controls that can be implemented to mitigate your fraud risk. One such example is to have the bank statement delivered, unopened, to the business owner. The owner reviews deposits for reasonableness and examines the checks for unusual payees. Management may also consider watching for employees who live beyond their means, have known financial problems or have a bad attitude toward the company.

Most employees are honest people. However, even the most honest person may find themselves in financial trouble and be more prone to making bad decisions.

Related Article and link to Susan Gunn.

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