How to reduce your fraud risk

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Earlier this month, an Ontario woman was charged in connection with a seven-figure fraud investigation but her out-of-pocket employer could have taken better precautionary steps, says one forensic accountant.

False credentials

Suspected of defrauding her former employer out of more than $1.2 million, Anna Carnevale was arrested by York Regional Police in early September.

The 43-year-old allegedly provided false credentials and documentation in order to qualify for the accounting position which she held between August 2008 and March 2014.

Police said during her time of employment, Carnevale wrote herself cheques from company accounts and used the funds to pay off bills and personal debt, allegedly committing 13 different types of fraud in the process.

Clearly it’s not always easy for employers to spot fraud but one forensic accountant says there are some signs to look out for.

Committing fraud

“Generally, someone will commit fraud when three things are present — known as the Fraud Triangle,” says Patricia Harris. “Pressure (usually financial), opportunity (the employee is in a position of trust), and rationalization/ethics (for example, a willingness to commit fraud and the ability to justify it to oneself).”

Harris is a partner at audit, tax and advisory firm Fuller Landau LLP – she says in many cases of misappropriation of funds, the person is in a position of trust and has authority to direct payments from the company coupled with a lack of sufficient oversight from the owners or supervisors of the company.

In addition, a high-risk employee may have personal debt, feel underpaid or be able to rationalize taking funds from the company.

Protect your company

“Ask yourself — could any one of my employees create a purchase order, process an invoice, authorize payment for the invoice, instruct a cheque to be prepared and sign the cheque? If so, your company may be particularly susceptible,” says Harris.

The finance expert suggests company owners segregate the duties of key employees and limit the authority of any one worker.

“An employee who has control over cash and doesn’t take vacation is often a red flag that business owners should be aware of,” she adds.
According to Harris, overseeing and reviewing accounting reports in a timely manner is also crucial in keeping fraud risk low.

Read Patricia Harris' full article here.

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