How To Prevent Employees Stealing From You by Faking Documents


Best Corporate Fraud Investigators Mumbai

Preventing Employee Fraud

The Three Way Match

This is one area where technology can work against you. Even an employee with low technology skills can easily get a printer and create fake documents which could  fool an expert. Document falsification typically may include checks with altered payees or amounts, fake voided checks, fake or duplicate purchase orders, invoices, receiving documents, or altered time cards. Your internal control needs to be developed with a good understanding of your work flow and processes.

One technique that can help you enhance accounts payable internal control is a “three way match.” This refers to matching an invoice with a receiving document and a purchase order before an item is paid in accounts payable. The more documents that need to be forged, the lower the probability. Most banks offer “Positive-Pay” checking accounts. Basically when you run your payables you transmit a control file to your bank with check numbers, payees, and amounts. As the checks clear, the bank matches the clearing checks to your control file. If an amount or payee does not match, you are immediately notified and you may elect to pay or bounce the check.

Establish Multi Level Authentication & Approvals

Unique form numbering schemes may make documents tougher to falsify and easier to spot fraudulent documents. Accounts payable should only pay from an original invoice with an original authorizing signature of the person approving the payment. Again, once checks are signed, they should be mailed out directly and not returned to the check requestor. Duplicate payments may be a sign of fraud. Your accounts payable system may be able to automatically check for potential duplicate payments by comparing invoice numbers, vendors, amounts, and purchase orders. You should scan the payment register and look for document number sequences that don’t look right. There are companies that will come in and do an accounts payable audit to check for duplicate payments. Many of these audits are priced on a contingency basis and you may only have to pay for the audit if they detect and recover duplicate payments.

Sales return documents, voided sale documents, and credit/discount documents may be falsified to steal money from your company. For example, an employee may record a sales return for a return that never happened. If your system is not properly controlled, the employee could then direct the refund into their own pocket. You need to make sure you have proper segregation of duties to prevent this. A former accountant at Ikea issued himself refunds for purchases made by customers. In less than one year he was able to steal $400,000. Basic return controls could have prevented this fraud. Refunds should not be processed until returned goods are received back in the warehouse.

Analysis of spending variances to budget and prior year can help root out fraud. In addition, a regular analysis of all balance sheet accounts may help detect fraud, if not deter it. If employees know that accounts are regularly analyzed and variances and anomalies are investigated, they may be discouraged from perpetrating a fraud. Always analyze your processes and methodologies with a keen eye toward segregation of duties. The general rule is that asset custody (cash, checks, inventory, and other assets) and record keeping for those assets should always be done by different people.

Contact us to conduct a complete audit of your company’s fraud prevention systems and based on our report we will help you set up a foolproof system that will plug loopholes and make your company secure from employee fraud. Remember preventive steps taken now can prevent great losses and risk to your business in the future. You could call me on my cell number – +91 98206 07875 to request a meeting.

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Author Bio

Amit Sen, a commercial pilot by training, has over 15 years experience in the space of corporate investigations, handling Copyright & Trademark infringement cases, Pre – employment verification Industrial Espionage investigations, Asset & Net – Worth assessment assignments and vendor / supplier verification cases, among others. Co-founder of Alliance One Detectives – which is the best corporate fraud consulting company in Mumbai. Amit has also successfully completed assignments in a wide range of sectors, including the machine tools industry, pharmaceutical industry, hospitality sector, specialized equipment (Oil & natural gas sector, aviation industry etc.), telecom industry & the IT & ITes sectors. These cases have all involved both offline and online investigations.

Article edited and co-written by Atin Dasgupta who is the co-founder and marketing head of Alliance One. Read more about Atin here.

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