Scott and Company: Experts in deterring and detecting accounting fraud
25 years of saving time and money for Midlands businesses
Columbia Regional Business Report – Book of Experts
The National Insurance Crime Bureau estimates that accounting fraud costs businesses roughly $20 billion annually, and research has found that the vast majority of it is preventable with improved financial controls. Because many business and non-profit leaders consider accounting fraud a black swan event — rare but potentially devastating — they dismiss the possibility that it might occur in their institutions.
Yet, the Association of Certified Fraud Examiners found that 42% of organizations with fewer than 100 employees experience a fraud event, costing them an average of $164,000. Because so many organizations underestimate the risk, they fail to take simple steps to ensure that their books are in order. Many believe that their annual audit will catch any untoward activity, but audits are not designed to detect most fraud.
Opportunity, justification and incentive are all necessary for fraud to occur, says Michael Slapnik, a member at Scott and Company in Columbia, who has 25 years of service to businesses, nonprofits and individuals focusing on detecting fraud, compliance, assurance and customized business consulting. Interrupting any of those three can prevent employees from engaging in fraud.
Opportunity usually arises because one person is entrusted with most, or all, of the accounting duties. Segregating those duties and cross- training employees to perform each other’s jobs is a simple way to diminish the opportunity to embezzle, says Slapnik. For smaller enterprises, CEOs must intervene in the finances and double-check invoices, review vendor lists and ask questions when suspicions arise. “Poor internal controls lead to opportunities,” he said. “It is the one thing companies have control over.”
Often, the perpetrator turns out to be a longtime, trusted employee who no one would ever suspect. Most of those who commit accounting fraud are first-time offenders. They often start small, justifying the theft as a loan, until the stealing snowballs. CEOs can trust their employees but still verify their work. Slapnik recommends that accounting department employees be required to take time off each year and allow others to handle their responsibilities. Another set of eyes on the accounting practices helps deter and detect fraud.
These are the kinds of issues that keep corporate and nonprofit leaders up at night. To alleviate their concerns, it helps to engage the services of an accounting firm to perform surprise spot-check audits that take a deeper dive into some elements of the business.
Scott and Company members have experience at the nation’s “Big Four” accounting firms. Unlike some firms that delegate most of their work to junior employees, Scott and Company members spend significant time with clients. For fraud prevention cases, they review internal controls, policies, and procedures, then test accounting systems and evaluate the results. This helps organizational leadership sleep at night and concentrate on other important business matters during the day. Call Michael Slapnik at 803-256-6021 to find out how he and his staff can help your organization.