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Fraud Prevention - Do You Have the Right Policies in Place?

Frank L. Varanavage, CPA, CFE
Frank L. Varanavage, CPA, CFE Director, Audit & Accounting, Investment Industry Group

Creating a board in your family businessFraud can blindside a company and it can come from any direction. When it comes to fraud, there is no prejudice. It can be large or small, external or internal. It can come from a high level executive or from low level staff. It can be a brand new hire, or an employee who has worked for the company for several years.

The Association of Certified Fraud Examiners’s (ACFE) 2016 Report to the Nations on the Occupational Fraud Abuse indicated that a  typical organization loses five percent of revenues in any given year as the result of fraud, and the total loss caused by the cases in their study exceeded $6.3 billion. Companies must ensure that they have the proper policies and procedures in place in order to protect themselves and avoid ending up in the headlines for the wrong reasons.

Policies and Procedures

To start, it is important to have a clear, concise, and well-written set of policies that addresses what the rules entail. These policies should then be linked to  procedures that identify the key controls that are in place and create a sense of ownership for the users. Before these policies are approved and implemented, management should test whether any controls are missing or there are other areas where a fraud could take place.

Companies should then review their policies and procedures at least annually for any holes that may have formed as the company has grown or expanded. While
growth generally indicates that the company is headed in the right direction, it can also open the door to new potential fraud opportunities.

By proactively reviewing your procedures on a consistent basis, you increase the chance of properly diagnosing problems before a fraud can occur. The ACFE offers a free downloadable fraud prevention check-up that helps you test your company’s fraud health and resolve fraud-related gaps with oversight, ownership, assessment, tolerance, policy, controls, and detection.


Another important part of fraud prevention is education. Without properly educating your employees, they may not know how to handle a certain situation or to whom they should escalate an issue. Your company can have the most well-written procedures, but if your employees are not aware of them, those procedures are meaningless. It is a good idea to offer training sessions at different times throughout the year, so those who have conflicts can attend another session. It is especially important that senior management attend these meetings to establish the “tone at the top.” This helps reinforce that these training programs are important and should be given the proper attention.

Posters throughout the facility and regular emails are also good reminders outside of the training sessions. The ACFE says the most common fraud detection method is when tips are reported. This is why it is so vital to keep your employees educated. Fraud detection is the responsibility of everyone at your company.

No company can completely prevent fraud. However, giving the topic of fraud prevention the attention it deserves can go a long way toward making it less likely to occur.

Frank L. Varanavage can be reached at Email or 215.441.4600.

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Contact the Author

Frank L. Varanavage, CPA, CFE

Frank L. Varanavage, CPA, CFE

Director, Audit & Accounting, Investment Industry Group

Investment Industry Specialist

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