Our experience in Turkey shows that owners of family businesses and bosses have the view that no significant fraud is committed on the grounds that there is a well established relationships in the company on the basis of TRUST. They often employ friends, family members, and other "trusted individuals", and rely on personal trust rather than systematic internal controls to protect them from fraud. Trust, without internal controls and checks and balances, is a recipe for employee theft. Often, the very traits that invoke management to rely on a trusted employee without checking his or her work make fraud possible. Remember, you can't steal from people who don't trust you.

Common employee traits found in fraudulent situations are:

1. Employees who go to extremes in their consideration of their fellow co-workers
2. Employees who work excessively and refuse assistance.
3. Employees who work excessively and still produce poor accounting records.
4. Managers or supervisors with dominant or controlling personalities who refuse to delegate work or take time off.

Many of the traits above are found in conscientious and reputable employees. All too often, however, these traits assist the employee in committing and concealing fraud by eliminating or circumventing internal controls and checks and balances.

Several simple steps that every small business owner should implement to prevent fraud are as follows:

1. Perform background checks on all employees,
2. Create an environment where honesty is practiced and employees are encouraged to be on the alert for fraud.
3. Create a culture that emphasizes segregation of duties and internal controls.
4. Company owners should always receive bank statements directly from the bank.
5. Maintain current and accurate accounting records.
6. Have the company's CPA perform periodic reviews of internal controls and perform interim reviews of the financial statements.
7. Set up a fraud hotline, and encourage employees to use it if they suspect fraud.
8. Insist that employees take time off, and cross train employees so that they can review each other's work.
9. Carry adequate employee-theft insurance.
10. Physically secure the business premises and assets.
11. Perform periodic inventories.
12. Review computer security for proper administrative and access rights.
13. Create a written fraud policy, as suggested by the Association of Fraud Examiners.
14. Consider engaging a certified fraud examiners.

Employee theft, fraud, and embezzlement are always going to be a concern for your business. Nothing you can do will completely eliminate the possibility that your business could become a victim of fraud. Following these simple tips, however, can go a long way toward preventing fraud, and encouraging its early detection before it destroys your business.

Cerebra having a Certified Fraud Examiners can provide fraud investigation and prevention services such as:

• Fraud risk assessment
• Fraud deterrence (prevention check-up and internal control reviews)
• Fraud investigation and litigation
• Financial reporting fraud
• Cash reviews and reconciliations
• Fraud awareness training

Please refer for more information.