One of the ways a company/Organization can prevent fraud is by setting up internal control methods these are the plans or programs implemented to safeguard your company’s assets, ensure the integrity of its accounting records, and deter and detect fraud and theft.

Top 5 Internal Control methods to Prevent and Detect Fraud!

Use a system of checks and balances to ensure no one person has control over all parts of a financial transaction.

Require purchases, payroll, and disbursements to be authorized by a designated person.

Separate handling (receipt and deposit) functions from record keeping functions (recording transactions and reconciling accounts).

Restrict use of agency credit cards and verify all charges made to credit cards or accounts to ensure they were business-related.

Require the reconciliation to be completed by an independent person who doesn’t have bookkeeping responsibilities or check signing responsibilities or require supervisory review of the reconciliation.

Examine canceled checks to make sure vendors are recognized, expenditures are related to agency business, signatures are by authorized signers, and endorsements are appropriate.

Provide Board of Directors oversight of agency operations and management

Monitor the agency’s financial activity on a regular basis, comparing actual to budgeted revenues and expenses.

Require an explanation of any significant variations from budgeted amounts.

Avoid or discourage related party transactions.

Require that a written conflict of interest and code of ethics policy is in place and that it is updated annually.

Require that related party transactions be disclosed and be approved by the Board

Protect cash and check collections.

Ensure that all cash and checks received are promptly recorded and deposited in the form originally receive

Issue receipts for cash, using a pre-numbered receipt book.