Part 10 of 10, Fraud Inoculation

Part 10 of 10, Fraud Inoculation Other Possible Areas of Fraud One of the areas of possible fraud, despite the above level of monitoring, includes employing the assets for personal use and not reimbursing the firm. Another is stealing either assets or inventory. Unless there is a 100% physical inventory every day, inventory remains vulnerable […]

Part 9 of 10, Fraud Inoculation

Part 9 of 10, Fraud Inoculation The Payoff for this Intensive Monitoring The owner of the firm that suffered this large-scale embezzlement never wants to be materially defrauded again. He has the cash balance in his head, every day. In effect, by going over the cash flows in and out regularly, and having a reporting […]

Part 8 of 10, Fraud Inoculation

Part 8 of 10, Fraud Inoculation Fraud Inoculation May I put approximate time requirements on the necessary monitoring activities? First of all, to start such a comprehensive program requires a 100% physical inventory, perhaps involving every employee for one day. Setting up this forward-going scenario would require a one-time investment of time of 10 to […]

Part 7 of 10, Fraud Inoculation

Part 7 of 10, Fraud Inoculation Fraud Risk Reduction Because material fraud rears its ugly head mostly over cash issues, we need to identify cash activities, thereby identifying the fraud risk candidates. The main areas of cash flow out, in small businesses are: Payroll checks Vendor checks Cash register refund transactions – checks/cash/credit cards Loan […]

Part 6 of 10, Fraud Inoculation

Part 6 of 10, Fraud Inoculation Cash Flow Forecast Of course one large contributor to survival was reducing the workforce. From the date of the fraud discovery to three and ½ years later, sales have decreased by almost half, yet payroll expenses have been reduced by more than 50%. With the small monthly repayment plans […]

Part 5 of 10, Fraud Inoculation

Part 5 of 10, Fraud Inoculation Working Capital Inventory replenishment became an intricate chess game as on-the-shelf inventory value in the warehouse quickly dropped from well over $1 million to less than $500,000, causing the purchasing manager major headaches. Many stretched vendors began to do business with this firm on a cash-on-delivery or paid-in-advance basis. […]

Part 4 of 10, Fraud Inoculation

Part 4 of 10 Recovery Egg-shell fragility reigned at this firm for three years after the embezzlement became public. When the initial shock wore off, and forensic accounting issues became less important, I became the Interim CFO and soon interviewed and hired, as another 1099 employee, a skilled, untainted person to do the daily accounting. […]

Part 3 of 10, Fraud Inoculation

Part 3 of 10 Fraud Details For emergencies Ted was a signer on the checking account because the owner and main check signer’s office was 25 miles away in a different city. Forensic accounting showed Ted signed 73 checks paying $231,299 for various personal bills (mostly personal credit card accounts) over a fifty-seven month period. […]

Part 2 of 10, Fraud Inoculation

Part 2 of 10 Background and History The former CFO of a multi-location publishing house in the Greater Phoenix area is now serving time in prison (as of December 2011) for committing fraud and embezzlement. A detailed analysis of the before and after situations at the defrauded firm might prove instructive to any small business […]

Is Fraud Inoculation Possible for a Small Business Firm?

Part 1 of 10 Definitions and Challenges If by inoculation, one means 100% fraud prevention in the future, then the short answer is no. Webster’s dictionary definition of fraud includes the following two sentences, “No definitive and invariable rule can be laid down as a general rule in defining fraud, as it includes surprise, trickery, […]