Basic fraud warning signs

Fraud will always be a constant concern. Here are some red flags that experienced forensic accountants look for.

Living beyond your means

Signs that employees are living well beyond their means can be a clue that they’re helping themselves to the company’s assets. Making sure there’s not just one person in charge of payroll or purchasing and reconciling the books. Make it clear as well that routine audits and inspections of expenditures will be done.

Unusual email

Emails that are out of character for the sender, or with orders outside the company’s normal practices, could be another sign of a scam. Being aware of inconsistencies and noticing emails written differently from how the sender normally communicates could stop online fraud schemes.

Loose Controls

When employees are used to skimming off the top, whether it’s an unsecured cash register or an open supply closet loaded with pricey items, companies can experience significant losses. Small to midsize companies can be easy targets of this type of asset fraud.

Not so friendly kickbacks

A kickback scenario is when an employee inside the company can have a deal with a friend, family member, or just a vendor he or she has gotten to know to overcharge the company. The vender ends up with more money from the company and the insider gets a kickback as a reward.

This can be one of the toughest types of fraud to discover, because the fraud is happening outside of the company’s sight.

Cooking the Books

Another sign is to look for is when things seem to be too good to be true for startups. Startups tend to report profit margins well above its competitors. When companies are always exceeding analyst prospects, like 15% profit margins while competitors see only 5%, may be a tale tell sign for review.

The key solution is to ask for specifics and hiring outside forensic accountants to go through the books and uncover fraud. Although audit is not the gold standard that fraud is present. Audit can only be good as the information that is provided.