16 Red Flags for Fraud in Your Business

Fraud is rampant in business today. According to the Association of Certified Fraud Examiners, U.S. organizations lose 5 percent of their annual revenues to fraud — about $652 billion a year. The median loss is $159,000, but one-fourth of the cases result in losses of at least $1 million. Fraud can be difficult to detect. The median length of schemes in an association study was 18 months from when they began until they were detected. Small businesses suffer disproportionately from fraud. The median loss suffered by an organization with fewer than 100 people was $190,000.

My friend John Capizzi, who is a Certified Fraud Examiner offers these Red Flags to look for:

  • An employee under financial pressure.
  • An employee with personality changes.
  • An employee demonstrating poor money management.
  • An employee living beyond their means.
  • An employee with outside business interests.
  • Poor company internal controls.
  • Too much control in a single employee.
  • Lax management.
  • Failure to pre-screen employees.
  • Records altered, missing or destroyed.
  • Chronic shortages.
  • Signatures on records appear to be forgeries.
  • Employee drug or alcohol abuse.
  • Employee gambling problems.
  • Employee gives inadequate answers when questioned about missing supplies, property or funds.
  • Customer or supplier complaints about shortages or discrepancies.

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