Accounting All-in-One For Dummies (+ Videos and Quizzes Online), 3rd Edition

Chapter 2

Preventing Cash Losses from Embezzlement and Fraud

IN THIS CHAPTER

Putting business controls in context

Checking out the internal control checklist

Realizing the limits of internal controls

Most people are honest most of the time. You can argue that some people are entirely honest all the time, but realistically, this assumption is too risky when running a business. In short, a business has to deal with the dishonesty of the few. The risk of fraud in business is a fact of life. Fraud is defined as willful intent to deceive. One function of business managers is to prevent fraud against their business, and it should go without saying that managers shouldn’t commit fraud on behalf of the business. (But some do, of course.)

Every business, large and small, is vulnerable to many kinds of fraud: customers who shoplift, employees who steal money and other assets from the business, vendors who overcharge, managers who accept kickbacks and bribes, and so on.

In this chapter, we walk you through different types of fraud and ways to protect your business. You’ll find out how to institute and enforce internal controls that are effective in preventing fraud. Such controls include ...