One-third of B.C. businesses have reported being victims of fraud. Jasper Smith, owner of Due Diligence Canada, and Dan Zitting, CPO of ACL, tell us how to avoid being one of them

Know the Angels1. Know the angles

Occupational fraud involves three factors known as the “fraud triangle,” according to both Smith and Zitting. First is some sort of pressure or motive, such as needing money. The second is opportunity due to access without controls or oversight. “It’s not just cash or cheques or anything financial,” says Smith. “It can be items from the company, the inventories—anything the company’s selling or purchasing.” And finally there is rationalization—“like, hey, it’s a big company and they don’t pay me fairly anyway so this is actually only fair,” says Zitting.


Know your Employees2. Know your employees

Do background checks on potential employees and outside contractors like accounting or bookkeeping services, advises Smith. And once they’re hired, get to know them. “You don’t need to spy on them,” he says, “but you need to be able to learn about what they’re doing: are they taking holidays, are they refusing promotions, are they living beyond their means?” Zitting adds: “A bookkeeper who never takes vacation—it’s often because there’s some kind of a fraud going on.”


Be Divisive3. Be divisive

Never give one person control over all the finances. For example, the same person should not be able to set up accounts for new vendors and issue cheques to vendors, says Zitting. Smith also advises giving employees access only to the part of the server they need: “Regular employees won’t need access to accounting. Accounting may need access to other parts of the server. So that should be split up.” And make sure to change computer and telephone passwords regularly, he adds.


Maintain Control4. Maintain control

As well as segregating duties, managers should still have hands-on control and know exactly what’s coming in, says Smith. “For instance, access to the mailbox should be the business owner and maybe one other person. And that mail should be delivered to the owner of the company unopened.” Or, says Zitting, once a month the owner or manager of the business could review new vendors. “Something like that might detect the fraud even though it’s already happened. Detect it early and make it so it doesn’t turn into such a big deal.” 


Look for Tips5. Look for tips

Smith suggests providing a tips line or an atmosphere where people can provide tips about suspected fraud; over 41 per cent of frauds are identified by tips, he notes, compared to around 20 per cent through other means. “The business owner really wants an open and healthy workplace that will allow management and staff to express any concerns they may have about any potential fraud,” he says. 




Illustrations: Victoria Park