11 Steps To Prevent Fraud and Theft


11 Steps To Prevent Fraud and Theft

In general, fraud and theft in companies are conducted by internal parties. Based on the Global Fraud Survey by Kroll and the Economic Intelligence Unit, in 2011, 60% of the frauds were committed by senior managers, junior officers or third parties.

To prevent this, it is important for companies to take preventive measures. The following eleven steps can be used to design internal controls aimed to tighten control over access to important documents and company assets.

  1. Do a pre-employment background check

Before recruiting employees, it is important for the company to check the background of the candidates to validate the data provided and check their track record. Companies certainly do not want to hire employees, who had been involved in certain cases in the previous company.

  1. Make policies and procedures to address dishonest and unethical behavior

Companies need to create documenting procedures and policies that describe unethical behavior, reporting procedures and punishment for the offenders.

  1. Ensure that the management supports the policy

Senior managers need to set the tone of ethical behavior in the corporate environment. The tone also gives a stern notion that fraud will not be tolerated.

  1. Training employees about the importance of anti-fraud programs

All employees must receive training on ethics and anti-fraud policies and sign an acknowledgement that they have received the training.

  1. Provide an anonymous reporting channel

Anonymous reporting channels are important to maintain the confidentiality of the complaint and so that reporters feel safe when they send a report.

  1. Restrict access to sensitive documents and manage audit systems

Access to areas of sensitive documents (invoices, journals, ledgers and more) needs to be limited only to employees who need the information for their work. An audit to access also needs to be maintained.

  1. Restrict the computer system access to sensitive documents and make the audit system

Access to areas of sensitive documents (accounting, inventory, and payroll software) needs to be limited only to employees who need the information for their work. An audit of access also needs to be done.

  1. Restrict access to areas where valuable assets are stored

Companies need to restrict access to areas where company assets are deposited (warehouses and safe cash) only to certain employees concerned.

  1. Install CCTV and recording equipment

Companies need to install CCTV and recording equipment to monitor entries and exits in valuable asset areas.

  1. Making a random audit

Random audits of inventory, cash, expenses, purchases, billing and other accounts by internal or external auditors aim at preventing the offenders to alter, destroy and remove track records or other evidence.

  1. Promptly investigate the report

Prompt investigation of the fraud report reduces the amount of losses that the company may suffer.




Fraud Risk Assesment: Module # 3 – Physical Controls to Deter Employee Theft and Fraud



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