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Fraud Detection

Fraud impacts the success and profitability of a business.  Thankfully, when the right tools are employed, most fraudulent activities can be identified and losses mitigated through the use of fraud detection services.  A qualified CPA firm with experience identifying and stopping fraud is best suited for this task. Failing to use professionals for can leave your organization at risk for internal and external fraud.

Types of Fraud

Fraud may be committed against an organization from both internal and external sources. The most successful organizations understand the risk of fraud and take steps to protect themselves from losses. Hiring an expert CPA firm to detect fraud can provide substantial cost savings and protect your business’s reputation.

Internal or Occupational Fraud

When an employee, manager or executive defrauds the organization it is considered “occupational fraud.” Most of the employed tactics fall into the following categories:

  • Inaccurate Reconciliations: Deposits and checks that are not accounted for in reconciliations may be indicative of fraud within the organization. If deposits are unaccounted for, a member of the organization may have stolen the funds. Checks that are unreconciled may be indicative of false payees.
  • Voided Transactions: In any business, a small number of voids can be expected. A large number of voids or a pattern of voided transactions may be an attempt to cover theft of services or merchandise.
  • Missing Documents: A pattern of missing documents should be investigated by a professional to determine if the organization’s processes need an adjustment or if the missing documents are being used to cover up fraud.
  • Increased Refunds: Refunds on false orders or phony customers provide a way for employees to provide monetary adjustments for personal gain. Another take on this theft method is to have check refunds for bogus returns sent to the employee’s address or the address of a friend or family member.
  • Time Theft: Theft of time most commonly occurs when an employee overstates their hours worked. This may be done by an individual employee or by multiple employees who account for one another’s time worked.
  • Customer Account Write Offs: Writing off unpaid customer balances is a normal business transaction. Unusual write off amounts or an increase in write offs may be evidence of customer payments that are being stolen.
  • False Orders: A marked increase in the number of orders shipped to a postal box versus a physical address may seem innocent at first glance. However, when these shipments are outside of the norm or are questionable in other ways, it may mean an employee is attempting to ship bogus purchases to themselves or individuals they know.

External Fraud

External fraud, or fraud committed by individuals who are not employed by the business, is as big of a risk as occupational fraud for businesses.  Incidents of external fraud can significantly impact an organization. With improved technologies, thieves are coming up with new and creative ways of stealing from your company, placing business owners and their customers at risk. Common ways to defraud businesses include:

  • Check Fraud: Check fraud is no longer limited to bounced checks or checks written on closed accounts. Today’s thieves employ a number of tactics including altering payees, forgery, check tampering and stolen checks in order to obtain merchandise or services without paying. Those who attempt check fraud can now use a valid refund check from a business in order to access account information and create nearly identical fraudulent checks that can be used to empty a business’s accounts.
  • Credit Card Fraud: Credit card transactions now account for a large portion of the business companies do, especially for transactions that are conducted online. If your organization is not taking adequate steps to verify credit cards, you can be left on the hook for transactions made with stolen cards or for unauthorized purchases.
  • Shoplifting: Shoplifting is the oldest form of external fraud that businesses face. Shoplifters are increasingly aware of camera systems and have adapted new techniques to avoid this technology. Inventory discrepancies and hidden merchandise can be a sign of loss through shoplifting or inventory theft by employees.
  • Vendor Fraud: Vendor fraud can come in many forms. In medium to large businesses, vendor fraud may be seen during the bidding process. All organizations run the risk of vendors bribing or partnering with an employee in order to obtain additional business or to eliminate competition.
  • Information Theft: Costumer information is increasingly being targeted by hackers and thieves as a way to obtain and then exploit consumer information. Thefts of consumer information can be devastating to a company’s bottom line as well as their reputation.

Fraud Detection Services

In order to protect your business’s reputation and bottom line, it is important to employ fraud detection services. A thorough fraud detection investigation will identify and correct fraud, as well as put in place preventative measures to reduce the risk of fraud in the future. Smolin’s team of fraud detection experts are suited for this task and include:

  • Certified Fraud Examiners: Certified Fraud Examiners are uniquely qualified to recognize and identify the indicators of fraud in an organization. Certified Fraud Examiners must have knowledge of the law, accounting methods and methods that individuals use in order to defraud organizations. Certified fraud examiners must document their ability and investigation skills through testing and must continue education throughout their career.
  • Forensic Accountants: Forensic Accounts use their knowledge of financial accounting with investigational skills. They are able to analyze large amounts of financial data to determine where breeches have occurred or are likely to occur. Additionally, forensic accountants are skilled in preparing information for litigation and presenting the information in a manner that is suitable for court proceedings.
  • Computer Forensic Specialists: With fraud being increasingly committed electronically, computer forensic specialists play a key role in identifying fraud and identifying the potential for fraudulent activity. Computer forensic specialists work on various computer equipment in order to restore information that individuals attempted to delete. These experts receive ongoing education to ensure they are kept knowledgeable about the most recent technologies.

Smolin provides fraud detection services that utilize the skills of an expert staff and outside consultants. By taking the time to understand your organization’s unique needs, our team is able to identify and address even the most complex fraud attempts. Furthermore, through the process of our investigation, the Smolin team is able to detail ways your organization can reduce the risk of fraud.

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