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 repayment plan checks

Auto pays in checking account

Pension/401k payments uploads

Unusual checks

Inventory product checks

Asset purchases, asset payment plans

Credit card charges

Petty cash out

Unusual/manual checks out

Postage machine/shipping charges

The main areas of cash flow in, in small businesses are:

Account receivable checks

Cash register transactions – checks/cash/credit cards

Employee COBRA checks

Loan/equity proceeds

Auto deposits in checking account

Asset sales

Credit card credits

Petty cash in

Unusual checks/cash in

If all the above avenues of cash flow in and cash flow out are monitored tightly, assuming such a scenario is possible, then only the cash-flow monitor has opportunity to commit material fraud. And if the owner, the monitor and the largest stockholder are all the same person, and he or she reports to the board of directors on a monthly basis, then his or her fraudulent opportunity could decrease to near zero.

5 Replies to “Part 7 of 10, Fraud Inoculation”

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