Increasing fraud is affecting both businesses and employees. The latest survey shows that many organizations lose billions yearly because of fraud. The percentage of fraud in the business world is increasing yearly because of several mistakes and human errors.
Businesses must hire a professional team of CPA in Oakland County, MI, MI, to identify and solve fraud with accounting expertise. This blog explains the importance of accounting expertise in preventing financial fraud in companies.
What are financial crimes?
Financial crimes can be of various types and involve multiple factors. Understanding the workings of a financial institution is necessary to prevent fraud and reduce crimes.
The different types of financial crimes include:
- Breach of important business data
- Identifying theft and takeover of the business account
- Financing the terrorist activities
- Money laundering cases
Financial crimes are conducted to gain financial advantages. They can include credit card fraud and Ponzi Schemes. These are the dangerous types of financial fraud that cause a heavy monetary loss in an organization.
Accountants need solid technology knowledge and the idea of crime patterns to reduce these fraudulent activities.
How is fraud detection beneficial for an organization?
Financial fraud in the business will reduce the profits every year. It also damages the reputation of years built by the company among the investors, stakeholders, and common people. Detecting fraud is necessary for any organization because of so many reasons, such as:
- Detecting fraud will prevent monetary losses for the company
- It protects the company’s image among the common public, investors, and creditors.
- Detection and prevention of fraud will build trust in an organization’s people.
- Reduction in fraud will save funds for the company .
Role of accounts in the detection of fraudulent activities
A systematic accounting approach will reduce the occurrence of fraud in an organization. The accountants will decrease the risks by tracking the fraudulent activities. They play an important role in detecting fraud in the business through many ways:
Effective internal control system
Any CFO or third party can set up an internal control system to track company structure vulnerabilities. Strong internal control will block outsiders’ access to financial information, thereby reducing fraud.
Examination of various areas
Fraud mainly occurs in sales, procurement, payroll, and deposits. Accountants must examine these areas carefully to check for fraudulent activities. They must also try something more effective than a traditional audit to track all the discrepancies in the organization.
Training the employees
Companies must introduce effective training programs for employees and management. They must educate the employees about the internal reporting system, work transparency, and a mechanism to track fraud.
Conducting IT security audits
Many cyber crimes occur in organizations today. To reduce cyber crimes, the company must regularly follow up with the IT department and ask it to conduct an IT security audit.
Checking all the vacation balances
Internal groups perform most fraudulent activities. Companies must switch jobs so that employees can track their regular activities. This approach helps track fraud and strengthens the financial areas of the organization.
The creative environment in the organization
A positive working environment will motivate employees to work honestly. It will reduce fraudulent activities in the organization day by day. The company must also frame written policies and rules for the employees to promote a fair working atmosphere.
Fraud can happen in any business, regardless of size or type. It can result in heavy losses to the company, its people, and its employees. Following efficient accounting practices and policies will track fraud and reduce it within organizations.