ShindelRock » Understanding and minimizing the chance of employee fraud

Have you ever considered the possibility of one of your employees engaging in fraud? Trusted individuals can betray that trust when three conditions converge, commonly known as the “Fraud Triangle”:

Pressure: There exists a hidden need for money, often driven by factors like overwhelming debt or compulsive gambling, which cannot be met through normal means.
Rationalization: The perpetrator justifies their actions to align with their self-perception. They convince themselves that their behavior is necessary, not unethical.
Opportunity: This is the critical element controlled by you as the owner. Without opportunity, the other factors become irrelevant.

While screening measures such as background checks, interviews, and drug testing can mitigate hiring risks, they cannot entirely eliminate them. Therefore, it’s crucial to minimize opportunities for even a previously trustworthy employee to compromise your systems. Implementing controls, like separating duties, is essential. For instance, assigning different employees to handle tasks such as opening mail and paying bills can prevent both the perpetration and concealment of fraud.

If you’re not certain if you have sufficient segregation of duties in your office, ask a ShindelRock tax professional to conduct an analysis ^[1] and recommend preventative changes to your operations to decrease your risk of embezzlement or fraud.