Small Business Fraud Misconceptions
A government report in November recently stated that the IRS issued $4 billion in fraudulent tax refunds over the previous criminals who were using other people’s personal information. The IRS reported it opened almost 1,500 criminal investigations related to identity theft in 2013 and that those fraud schemes have grown more sophisticated and complicated. Aside from individual fraud, there are also many fraud misconceptions that small businesses face. The most common small business fraud misconceptions include:
Small Businesses are still at Risk- Small business owners should be sure to avoid the misconception that smaller companies are not at risk. Smaller companies are just as likely to be at risk because there are often less anti-fraud controls and procedures in place. According to a study conducted by the Association of Certified Fraud Examiners, companies with fewer than 100 employees represented about 32% of fraud cases reviewed by ACFE.
Loyal Employees could still commit Fraud – Unfortunately, honest employees can often do dishonest acts when in a position of responsibility. The report showed that 87% of people who commit fraud were never charged with fraud related convictions prior to committing the offense. In many cases, employees gain the trust of their management and wait to have a better understanding of the anti-fraud procedures.
The Cost of Fraud – The median loss reported in the study was $140,000, and the average loss for smaller companies was slightly higher at $147,000. Once fraud is committed, it is extremely difficult to regain the lost money unless it is a very large amount.
Having the proper controls and procedures in place is necessary to prevent and detect fraud. If fraud is suspected, a forensic accountant can be used to determine what happened. Staying ahead of the game is essential to avoiding fraud.