WSJ reports that employee fraud – from check-forgery, petty cash to billing larceny schemes – often rises in tough economic times. Employees feeling financial pressure often fuels the problem. Small companies are especially vulnerable because they often lack stringent internal controls to prevent fraud. Managers may attribute lost funds to lower sales, never suspecting foul play. “A lot of times a small business will close its doors, and may never know they were defrauded — that the problem wasn’t a declining economy, that employees were stealing,” says James D. Ratley, president of the Association of Certified Fraud Examiners, an antifraud trade group based in Austin, Texas. Jeffrey Sklar, a partner at Bellmore, N.Y., accounting firm Sklar, Heyman & Company LLP, says “Desperate people do desperate things.” Sklar says business owners should watch employees who seem to live beyond their means. Employees guarding access to accounting software or who never take a vacation should also raise suspicion. Business owners should review every canceled check and look at the signature on the back. They should review bank statements each month and check for unusual transfers. Once a business owner discovers alleged fraud, a quiet approach is recommended, drawing on an accountant and attorney’s help. Most employees are ashamed and agree to a deal to avoid prosecution, Mr. Sklar says. The chart attached reflects some of the types of potential fraud that should be monitored.
