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Is There Risk of Fraud in Your Organization?

Paycheck Protection Program loans and other assistance available for business owners struggling due to the ongoing COVID-19 pandemic are designed to help those most heavily impacted by restrictions and shutdowns. However since the program began in 2020, multiple businesses and individuals have been caught using these funds for fraudulent activities, causing a greater crackdown regarding who qualifies for the loan and forgiveness. With the SBA and IRS paying closer attention than ever to business tax fillings and on high alert for signs of fraud, are you and your business safe?

While we ourselves may have no bad intentions for our businesses and business practices, it is possible to miss the signs of fraud being perpetrated by others within your business. Knowing what common types of fraud to look for can help minimize your risks and identify any potential problems that may already exist. Those common risk factors include:

Large Amounts of Cash on Hand

Businesses that keep large amounts of cash on hand are more likely to see fraudulent activity. The temptation to skim money during cash exchanges may be too much for some employees, especially in situations where those transactions aren’t regularly monitored and recorded. Likewise, businesses with non-fixed, custom pricing can also be vulnerable.

Easy Resale of Merchandise

Retailers and merchandisers who carry products with a high resale value and built-in resale market face an additional risk of fraud. Limited edition items and luxury items are especially vulnerable and should be closely monitored.

Fraud at Higher Levels

While you may have measures in place to discourage theft and fraudulent activity among your lower-level employees, what oversight is there for those in positions of power? Managers, HR employees, and executives tend to inspire more trust, but this authority can provide opportunities for less savory activity. Creating ‘ghost’ employees to collect additional pay, accepting bribes for favors, and falsely reporting things like overtime and business expenses are all ways employees in more senior roles can subvertly commit fraud against your company.

Fraud Prevention to Protect Your Business

Even if you didn’t receive a PPP loan or you’ve utilized it honestly and successfully, protecting your business against internal fraud is vital. Having fraud prevention measures in place helps create a sense of security and trust for both clients and your team. Some simple steps you can implement include:

Reducing Opportunity

Creating procedures that reduce the opportunity and temptation to commit fraudulent acts is fundamental for protecting your business. Separation of duty, routine inventory auditing, and multi-step authorization for important business transactions are good places to start.

Proper Documentation

Even though we are in the digital age, ensuring that proper documentation procedures are in place is still a must. Properly maintained contracts, careful documentation of all invoices and payments, and recording any disciplinary actions and employment changes help to protect your interests should anything ever arise.

Conduct Your Own Internal Audit

The easiest way to prevent fraud-related legal issues and heavy fines is to catch the problem yourself. An internal audit allows you to take a closer look at the inner workings of your business to find anything that may be amiss and warrant closer investigation.

Working with a certified fraud examiner gives you the added advantage of both a fresh set of eyes and extensive knowledge and expertise.

DesCPA offers forensic accounting services that can help put you at ease and protect the future of your business. Contact us today to learn more about how we can help you.


All information contained in this post is for informational purposes only. The information found on and its affiliates does not constitute financial advice.


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