Internal Controls Review
According to the US Chamber of Commerce, almost 30 percent of business failures directly correlate to employee theft or abuse. According to employee theft statistics, 95 percent of all businesses suffer some form of employee theft, including time theft, inventory theft, or embezzlement. In the auditing profession, the Fraud Triangle is a concept that is used to explain the reasons why an individual might commit fraud.
The Fraud Triangle has 3 components that, when present, significantly increase the risk of fraud. These are:
1. Incentive 2. Opportunity 3. Rationalization
Many small business owners think, because of their small size or close-knit nature of the business, that the risk of fraud and theft is low. Unfortunately, the opposite is true. We’ve seen firsthand the significant losses that can occur when an employee or partner, in a low control environment, has the opportunity to steal tens or hundreds of thousands of dollars.
Internal controls are the processes that we use to, as much as possible, eliminate the opportunity to commit fraud. From segregation of duties to approval workflows and electronic payment systems, a properly designed system of controls can significantly reduce an individual’s ability to commit fraud. We work with our clients to first review their existing systems and identify weaknesses, and then with them to design processes that help protect the business without being overly cumbersome. If you’re concerned about the risk of theft in your business, please reach out to us and we can discuss your situation in more detail.