Where is Fraud Likely? - Part 1 |
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Where is fraud likely to occur in an entity? The answer is that fraud can occur anywhere in an organization. All it takes is someone to determine how the internal controls in the organizations can be circumvented and how to undertake the fraudulent conduct (usually the theft of assets).
For internal control to function properly there needs to be separation of the responsibility for custodianship of the assets and the record keeping for those assets. Many small organizations lack the personnel to completely separate those functions. When that occurs management must take responsibility for certain functions to ensure separation of duties. For example, when the organization only has one bookkeeper who writes the checks and does the bookkeeping, the monthly bank statement should go directly from the bank to someone in management who should review the cleared checks before the bookkeeper does the bank reconciliation. The manager should also review the completed bank reconciliation when it is done.
In future blogs we will discuss specific areas where fraud might be likely within the organization and the steps management can take to prevent fraud from occurring.
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