Loss Prevention Policies
Unit 5 IP
Loss Prevention Policies
Each year companies stand to lose at least five percent of revenues to internal fraud. This may seem like a small percentage but it adds up. That five percent can be the difference between staying afloat or filing bankruptcy. When a company spends time and money to prevent fraud it is far less than running the risk of internal fraud.
The most effective way to prevent fraud is to establish a proactive fraud prevention program. It is best if a company seeks the advice from a qualified fraud expert. A successful fraud prevention program requires three elements: education, investigation, and proactive preventative ...view middle of the document...
By implementing these components a company can create a system of checks and balances that help bring errors and fraud to attention. The company should enforce an anti-fraud environment that includes employees because it is important for them to understand that anti-fraud is for their protection as well (Coenen, 2011).
Implementing a fraud prevention program is a daunting task but it is worth the efforts. A well constructed anti-fraud program should be monitored and updated as the business changes and develops (Coenen, 2011). If a company is committed to their program they will save money because they have reduced the opportunity of fraud. Also fraud prevention programs can highlight opportunities that may allow fraud to take place. The company is then able to take action to eliminate those opportunities. Overall, fraud prevention is just good business.
Detective controls are designed to detect errors or anomalies that may have occurred. One of the most important and effective detective controls is implementing monthly reviews of reconciliations and concurrent reviews of detailed transactions (Virginia Tech, 2011). Reviews of reconciliations are a tool that supports the detective controls. Reviews are the preliminary process in the system of checks and balances in order to prevent fraud, theft, or inappropriate use if funds. Monthly reviews also give a company insight to the effectiveness and efficiency of business practices.
Management is responsible for ensuring that reviews are adequate and provide assurance that any irregularities are detected in a timely manner. A review can be the final check on the appropriateness of expenditures (Virginia Tech, 2011). A review of detailed transactions can provide the company a blueprint of revenues and expenses. The blueprint can specify opportunities to restructure the business processes.
In order for a fraud prevention program to be effective a system of checks and balances must be applied to accounting and administrative controls (SSF, 2011). Accounting controls needs to supply assurance that employees are performing transactions that align with management direction and authorization levels. Posting records daily will ensure that activities conducted each day are kept separate. This allows errors to be located and corrected easily. Every month subsidiary records should be balanced and a review of the reconciliations should be completed. Internal reports are necessary to review key areas of the business operations. Checks, cash receipt vouchers, and journal vouchers should be kept in sequential order (SSF, 2011). This assists in reconciling and controlling used and unused items. The business must also provide an audit trail through documentation. This allows each transaction to be tracked. Any documentation should include the employees name, the transaction date, and the amount.
Administrative controls are the responsibility of management. Administrative controls create the lines of authority...