Accounting Fraud Prevention
Using Internal Control and Prevent Accounting Fraud
1. Open the Bank Statement Yourself
Every small business owner should receive the unopened bank statement. Then they should review each check for authorized payee and signature and approve electronic payments. Only after they do the above should they give it to the bookkeeper.
2. Don’t Let Your Bookkeeper Reconcile the Bank Account
3. Close the Prior Accounting Periods
4. Attach Scanned Images to Each Accounting Transaction
Most fraud occurs from check tampering. For example, the bookkeeper changes the payee to themselves. Prevent accounting fraud by scanning the bill and linking it to each accounting transaction.Thus, this makes it harder to fake a bill.
5. Set Up Username for Each User
If your staff login as “Administrator,” then you have no idea who made what entry. Set up a username for each user that way you can track who did what and when.
6. Restrict User Access
Make sure you have separation of duties between authorization, record keeping, and custodial responsibilities for each accounting transaction.
No system of internal control should be built on trust. The best accounting practice is to separate out the following functions: authorization, record keeping, and custodial responsibility for assets in each accounting transaction.