Small Organization Fraud is a Big Problem

“Small organizations had a significantly lower implementation rate of anti-fraud controls than large organizations. This gap in fraud prevention and detection coverage leaves small organizations extremely susceptible to frauds that can cause significant damage to their limited resources.”

“The median loss suffered by small organizations (those with fewer than 100 employees) was the same as that incurred by the largest organizations (those with more than 10,000 employees). However, this type of loss is likely to have a much greater impact on smaller organizations.”

These two quotes from the 2016 Report to the Nations on Occupational Fraud and Abuse by the Association of Certified Fraud Examiners should make any small business owner pause. Is your organization better prepared to deal with fraud prevention then the average small organization? If your answer reflects any of the following, it may be time to make fraud prevention a priority:

-         I have trusted employees and they would never commit fraud.

-         I work with family members.

-         I’m sure my accountants have thought about fraud prevention.

-         I have an audit or review done annually.

I have heard all of the above statements multiple times while investigating a fraud event. In fact, if you have long-term employees and family members in your organization you are likely at a higher risk than most organizations.

Fraud prevention doesn’t happen by accident. Proper planning needs to be in place to make sure your fraud prevention controls are changing with the environment. Organizations need to look at the implications of changes in the environment from a fraud prevention perspective before implementation of the change. They also need to periodically sit back and have an independent risk assessment done to make sure they are not overlooking any risks.

So, what if you are an organization that has not thought about fraud prevention…ever. Then it is time to figure out what risks you are vulnerable too. Often times the best way to accomplish this is by having a fraud risk assessment done. This will give the organization a base line from where to start and identify high risks that should be acted on immediately.

If your organization would like to continue a discussion on this topic, or other fraud related topics, please email me at [email protected].