Identifying and preventing fraud

At CK Chartered Accountants we can advise on a wide range of issues which we know are important to businesses in the West Midlands area. This article considers strategies for identifying and preventing fraud.

Your business, like every other business, is threatened by fraud. Some estimates suggest that fraud could be costing the UK economy in excess of £30 billion a year. It is essential that you are aware of some of the most common types of employee fraud, that you can identify them when they do happen and, ideally, prevent them from happening at all.

There are, broadly speaking, two types of employee fraud. Fraudulent financial reporting is usually committed by senior officials or management, and involves altering financial statements to deceive business owners. Misappropriation of assets is far more widespread and can be committed at any level by any employee and in many different ways. Here are some common areas where fraud can take place.

Personal and company cheques

There are numerous fraudulent schemes that employees can carry out using personal or company cheques. Here are some examples, along with the action you can take to prevent them.


Credit control

The department responsible for collecting debts and bringing money can offer temptations for less honest employees. Typical scams include:


Stock and equipment

Pilfering and theft are very common in most areas of business. Theft of inventory and small tools by employees for personal use or resale can add up to a large loss on the part of the company.


Purchasing and payroll

As with the credit control department, there are opportunities for fraud within the department responsible for paying out money. For example:


Preventing fraud with internal controls

Effective internal controls can drastically reduce the risk of fraud in your business, but every control will have an administrative cost. You will need to evaluate the cost of additional procedures against the financial risk of fraud. Fortunately there are some inexpensive measures that you can take immediately.

By focusing on the four areas we have covered - cheques, credit control, stock and equipment and purchasing and payroll - and by introducing internal controls, you will be able to minimise the risk of fraud to your business.

If you are in the West Midlands area and are looking for support and advice from a team of professional accountants and business advisers, contact CK Chartered Accountants.