Fraud can happen at any organization. An enterprising fraudster will quickly exploit any lapse in controls, and these crimes often slip past leaders and lead to significant financial losses. Help your organization stay secure by learning about some of the most fraud-prone areas, along with strategies to help mitigate risk.
Leadership Transitions
Red flag: Turnovers in executive management
Potential problem: Executive management changes can create gaps in oversight when an organization’s controller, CEO, or other key leader assumes more responsibility. Without additional oversight during these periods of leadership change, these interim financial leaders may take advantage of the opportunity to commit fraud.
Prevention strategy: Establish mechanisms to provide appropriate oversight of anyone with access to the organization’s finances, even if they are filling the role on an interim basis.
Red flag: Leaders who lack an institutional knowledge base
Potential problem: Especially in government and nonprofit organizations, new executives often rely on bookkeepers for training on accounting processes. If those bookkeepers choose not to share key information or fully explain the process, they can take advantage of the changeup in leadership to misdirect funds without detection.
Prevention strategy: Provide new leaders comprehensive training on accounting processes, internal controls, and their own oversight responsibilities. Teach them how to access full documentation of the organization’s financial activities.