Construction Update

Know the Red Flags of Employee Fraud

The Association of Certified Fraud Examiners has estimated that U.S. businesses lose an average of 6 percent of their revenue to fraud.

It’s impossible to eliminate employees’ access to company assets, since it’s their job to manage and increase those assets. But in a recent issue, we said business owners can reduce opportunities for fraud by strictly and steadily enforcing internal controls.

Controls don’t mean automatic pilot, though. It’s still imperative to pay attention — because the larcenous mind can be highly creative.

When pilfering is underway, it often creates warning signs that observant owners can read. These indicators aren’t high-tech, and just by being aware of them, contractors have spotted some swindles.

• Turnover. High turnover in accounting or bookkeeping departments might mean a manager is pushing out employees before they can learn the system and discover a book-cooking caper.
• Pre-numbered documents. Undocumented destruction of pre-numbered documents — or failure to use them at all — should be investigated.
• Exchange instruments. Are employees using many cashier’s checks, money orders or checks made out to cash? There may be a good reason, or a bad one.
• Balancing acts. When checking accounts aren’t reconciled in a timely manner, it may mean the bookkeepers are busy. Are they busy embezzling from you?
• Originals. Look at your invoice file. Have original documents been replaced with photocopies? That may mean the originals were altered.
• Workaholism. When an employee with access to company assets resists vacations, he may be working too hard — or protecting a dodge.
• Lone rangers. Likewise, when your accounting manager is unwilling to accept additional personnel, she may have something to hide.

For more information about our services to the construction industry, Contact:
Mark Lund, Parter-in-Charge of Construction Services at 713.297.6907.

The articles in this newsletter are general in nature and are not a substitute for accounting, legal, or other professional services. We assume no liability for the reader's reliance on this information. Before implementing any of the ideas contained in this publication, consult a professional advisor to determine whether they apply to your unique circumstances.