By: Sharon B. Gubinsky, CPA, CFE, CGMA
The actor Michael J. Fox once said, “I like to encourage people to realize that any action is a good action if it’s proactive and there is positive intent behind it.” And Bruce Lee commented, “Knowing is not enough. We must apply. Willing is not enough. We must do.”
One usually thinks or hears about a fraudulent act after it has occurred, and then all one can do is react. Just last week, two cases of embezzlement in Montgomery County, Md., crossed my desk. One involves an employee stealing from the employer; the other concerns a director of a nonprofit who was padding a personal bank account and deceiving donors. Fraud is not industry specific, and no business is immune. If two cases were disclosed in one week in one county, how many have remained undetected?
When an event happens, it can’t be undone. This is being reactive. We don’t usually hear about the other side of forensic accounting – being proactive – very much. However, it is significantly less costly and time intensive to prevent fraud by being proactive than it is to conduct a full-blown forensic examination, or by being reactive. Forensic examinations are necessary after the fact in order to reach a settlement and to assist the injured party in recouping losses or the cost of potential litigation.
Fraud prevention entails implementing strong internal controls and best practices. By having an internal control and risk assessment examination, you can protect yourself from being susceptible to the improper use of your funds. By removing one’s access to means to commit fraud, you diminish the opportunity to seize assets. Three factors must be present for fraud to occur:
As a business owner, you cannot control the first two factors, but you can control opportunity. You can learn how to shut the door on a potential fraudster by implementing some proactive best practices.
You have invested your time and energy into building your organization. Similar to your family or your home, your business should be protected, too. Being proactive against fraud is similar to having insurance. You are investing in measures that will safeguard your assets against potential threats. No one has a crystal ball, but you can shield yourself to make any attack as difficult as possible to carry out.
Sharon B. Gubinsky, CPA, CFE, CGMA, is a principal at one of Topline’s founders, Santos, Postal & Company, P.C. Sharon leads the firm’s Fraud and Forensic team, as well as its Outsourced CFO Solutions division. Sharon can be reached at (240) 499-2053 or SGubinsky@SantosPostal.com.