The Proactive Solutions Blog

Are you creating an opportunity for fraud?

Posted by on 04.20.16

As business owners, business consultants and certified public accountants for over 35 years, we have witnessed fraud firsthand and have seen fraud in approximately 20%-30% of businesses. Many of these fraud cases were committed by a trusted employee.


The following is a list of questions that should be carefully considered and answered honestly. If you are able to answer “No” to any one of them, you are possibly creating an opportunity for fraud to exist in your company.


Are all bank statements sent directly to the owner?

Does the owner open and review all bank statements?

Does the owner implement random audits of cash disbursements?

An example would be to select 10 items per month to review against the purchase order, receiving report, invoice, statement and cancelled checks.

Is the bookkeeper and/or controller covered by a specific (separately endorsed) employee dishonesty policy?

Are duties involving cash separated between two or more persons?

An example would be for one person to write the checks and having another person reconcile the cash accounts.

Are the number of cash accounts limited?

Do you use an outside payroll service?

Do you have a strong internal financial staff, such as a CPA?

When hiring financial staff, do you verify employee references and personal history by using a background service?

Do you require financial employees to take vacation?

Do you obtain assurance (compilation, review and audit) services from an outside CPA firm?

Do you personally sign all checks, never using a signature stamp?

Do you require dual signatures on checks over a certain amount?

Do you review all bank statement electronic transactions, daily?

Do you require a complete bill file for payments (i.e., purchase orders, invoices, and receiving reports with appropriate approvals)?

Do you use a credit alert service?

Do you review your credit report regularly?

Do you prepare budgets and compare the actual results to the budgeted results and investigate significant variances?

Have you developed a fraud policy and discussed it with all employees?

Do you provide rewards to any employees who discovers fraud at the company?

Do you lock-up blank checks?

Do you never sign blank checks?

Do you reconcile all cash accounts monthly?

Do you reconcile all balance sheet accounts monthly?

Do you review and approve all journal entries?

Do you require receipts for credit card payments?

Do you prohibit the issue of credit cards to employees?

Do you prohibit the issue of gas cards to employees?

Has your CPA evaluated your accounting staff? Is the staff the best at what they do?

Do you take regular inventories of all materials, supplies and fixed assets?

Have you established strong computer system security policies?

Do you take a good look at each month’s financial statements and ask questions, i.e. “What is this…”?

Do you ask your controller to prepare a monthly executive summary of your business, the good and the bad?


Contact Dave O'Brien ( or Jim Weber ( today with questions!