Fraud Prevention – What Can You Do

In our previous article, Internal Fraud – The Threat from Within (April 2017), we gave a broad outline of the basic steps that can be taken to help reduce the chances of internal fraud and increase the chances of fraud being identified if it is happening.

This article sets out in a bit more detail some of the policies and procedures you should consider implementing in your business, if they are not already in place. The size of your business, and the number of employees involved, will have a bearing on what can be done.


The employees of a company can be its greatest asset or its greatest liability. Employing the wrong person can have a devastating effect on the well-being of the company if they are able to cause financial or reputational damage.

There are no employment policies or procedures that will guarantee that an employee will not cause problems but having a good, robust process in place when employing a new person will give you the best chance of identifying issues before the candidate starts work.

• Do due diligence and make a proper assessment of the applicants who are applying for the position. Are there any gaps in their CV that need explanation?

• Establish the relationship between the applicant and the named referees and make personal contact with each referee. Are they independent enough that you can rely on their assessment of the applicant?

• Make any offer of employment conditional on getting a clear reference from the applicant’s current employer if they have asked you not to contact them until a position is offered. If the applicant won’t accept that condition you would want to know why.

• Take your time to assess the trustworthiness of the new employee before handing over access to bank accounts etc.


As with the employment process, there are no accounting policies and procedures, other than doing everything yourself, that will absolutely prevent any form of fraud being committed by an employee but having the right ones in place should lessen the chances of it happening and increase the chances of you finding it quickly if it does.

• As far as possible, separate the duties of staff so that no individual can control all aspects of a transaction – from ordering of stock or issuing purchase orders, to receiving the supplier’s invoice, to making payment of that invoice and reconciling the bank accounts;

• If your business is a small one and there is only one person responsible for the office administration, then you personally should be the one who clears and checks the mail and the one who carries out final checks on creditor batch payments and authorises the payments to be made.

• Have set systems and procedures in place for making payments that all staff are aware of and follow;

• Conduct stock reconciliations;

• Carry out spot checks, at irregular times, to ensure policies and procedures are being followed. Remember that the higher up the management hierarchy an employee is the greater the damage they can do to the business.

• Have a “whistle blower” policy in place and ensure that all staff have the confidence to report any activity by other employees that is in breach of the systems and procedures.

• As director, ensure that you understand the company’s financial performance and position, by monitoring transactions through the company’s bank accounts and regularly obtaining and reviewing profit and loss and cashflow information for the business;

• If there is any change in the financial performance or position that is not able to be explained by the trading conditions, investigate.


When you, as director of the company, are heavily involved in doing the work of your business, it is very easy to allow staff to look after the administration with little or no oversight, but the risks of doing so are high and the consequences, if an employee is defrauding your company, can be catastrophic.

If, from the beginning, all staff are aware of the policies and procedures that are in place and know that you will be checking on what they are doing, for their protection as much as for the business, this should reduce the chances of fraud occurring and increase the chances of identifying the fraud if it is.

If you would like more information or advice on your business systems and procedures, please contact McDonald Vague.

Colin Sanderson

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