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Trying to Identify Fraud in Your Organization

By James I. Marasco  |  Partner

It can happen anywhere. Where pressures and opportunities exist, individuals may may be tempted to commit fraud against their employer. And, according to the Association of Certified Fraud Examiners, after their acts are perpetrated, they will rationalize their actions to themselves and others.

Even the most trustworthy of employees can succumb to pressures. Bad investment choices, a spouse’s disability, college tuition and unexpected expenditures can all lead to unavoidable pressures on your employees.

Weak internal controls or vulnerabilities in your organization may offer the opportunity for an employee to commit occupational fraud against their employer. If you suspect someone has crossed the line, it’s time to go into detection mode. Here are some high-level areas you can examine.

Check the Cash

  • Examine your bank statements and cancelled checks. If they aren’t physically available or you suspect they have been compromised, review them online or request copies from your bank.
  • Compare the cancelled checks with those listed on the statement. Were any removed or altered?
  • Were bank reconciliations performed in a timely manner and reviewed by someone?
  • Are any unusual adjustments or reconciling items present on your reconciliations?
  • Do any payees or addresses look suspect?
  • Examine transfers and debits on bank statements. Are they appropriate? Can you identify them?
  • Are there any excessively large or even amount check or debit withdrawals from the account?
  • Have all credit memos been issued, examined and reviewed by an independent party?
  • Do refunds being made have adequate support and proper documentation?
  • Perform your own test of integrity – mail some cash into your organization on behalf of someone’s account. Does it get credited properly?  Run an active vendor listing off your payable system.
  • Examine all P.O. Box addresses carefully. Do any suspicious names or employee names appear? If so, run an activity report of all disbursements made to them and look for supporting i
  • Information in the files.
  • Perform a surprise petty cash count. Do receipts for disbursements exist and is the cash accounted for properly?


  • Do you perform unannounced inventory counts of your higher priced products and reconcile the quantity to perpetual reports?
  • Are high cost items or highly coveted products adequately safeguarded?
  • Examine receiving logs. Are shipments being logged in correctly and examined for completeness upon receipt?
  • Are shipments that leave your dock safeguarded adequately against pilferage by the drivers?
  • How often are cameras checked for unusual activity?

Payroll and Expense Reports

  • Review the payroll records and reporting for all those who have access to the payroll processing system. Do they look reasonable?
  • Check the quarterly payroll reports – are there any suspicious or “ghost” employees? Do you routinely confirm that payroll tax liabilities are being timely paid?
  • Examine payroll records for employees with no withholdings or P.O. Box addresses. Are they legitimate?
  • Do overtime hours and pay appear excessive?
  • Are all expense reports approved by an independent party?
  • Examine the expense reports of those who have approval responsibility. Are reports adequately substantiated with original documentation?
  • Are the items being reimbursed appropriate, and do they meet your organizational guidelines?
  • Are company credit cards monitored monthly for the activity being charged on them? Are employees required to submit expense reports? Do these reports reconcile to the activity charged on the credit cards? Request a credit activity report from the issuer or obtain online and review the activity against individuals’ expense reports. Is this activity being captured on their reports? Are they seeking reimbursement for items already charged to the organization?

Fixed Assets and Equipment

  • Is your equipment tagged, inventoried and accounted for?
  • Perform a reconciliation of your current listings against what’s on hand. Is there anything missing? Can you narrow down who has access to it?
  • Are employees allowed to drive company vehicles? Do you regularly monitor where they are driving and how fast through GPS-type devices?
  • Do you frequently change your security codes for door access and can you monitor who enters and leaves your premises?

Information Technology and Accounting System

  • Do you frequently monitor network activity to see who logs in and when?
  • Can you trace where employees have gone on your network or Internet? Are certain sites prohibited?
  • Do you allow employees to save files from your network to external drives or computer hard drives? If so, do you have the ability to determine what files are being downloaded? Are their actions appropriate?
  • For company issued cellular phones, are invoices periodically examined for appropriate usage and charges?
  • Can individuals who have access to your accounting system modify or alter previously recorded journal entries or check payees within the system? Verify that entries being made at the end of each month make sense and are not being made to mask fraudulent actions of an employee.

Call for help

If, through your investigation, you find your organization may have been compromised in some way, reach out for help. Chances are that a perpetrator may have found and exploited other weaknesses in your system that you haven’t considered. You need to safeguard the organization from future losses and quantify your current exposure before it’s too late.

About Jim Marasco:   Jim is a Partner at EFPR Group, LLP and one of the Founding Members of StoneBridge Business Partners, an affiliated consulting firm.  He is a member of the firm’s Business ValuationLitigation Support & Forensic Services Group and other nontraditional accounting services.  Jim has been with EFPR Group for over 20 years and is a full-time management consultant traveling extensively throughout the country. He has helped safeguard some of the largest Fortune 1000 companies from fraud and abuse and has assisted in the identification and recovery of millions of dollars back to the affected parties. His experience is mainly concentrated in the healthcare distribution and franchise fields, where he has worked with over fifty of the top franchisors in the U.S.  In addition, he has worked closely with the Catholic Church in the U.S. for the past five years assisting in their compliance efforts to ensure the safety of children within the church.  Jim is also a court-recognized expert, lecturer and author on varying subjects of fraud and forensic auditing. 

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