Closely Held Businesses: Internal Controls in Tough Economic Times

This year, as a result of the recession and general economic challenges, companies and
organizations are more likely to fall victim to crime; whether it be the misappropriation of cash and other assets or fraud by employees worried about losing their jobs. 
 
 Employees tend to fall into three categories. They are either:
 

1.  Completely honest;
2.  Completely dishonest; or
3.  People that may commit fraud depending on the external pressures put upon them.

 
The biggest risk category is people that may commit fraud depending on the external pressures put upon them. Currently, the likelihood that external financial pressures might trigger a person to commit a crime is greater than it has been for decades. 
 
We recommend that companies and organizations take the following steps to protect themselves:
 

• Review banking records for any unusual or unexpected transactions; 
• Review accounting systems for any unusual transactions;
• Perform reconciliations as soon as possible and verify all reconciling items;
• Review IT and office entry logs to see if there has been any unexpected/unusual access or entry; 
• Review journals for any large sum amounts or transactions that may have been processed a unusual times;
• Watch out for any unexpected non-attendance at work or unusual behavior by employees;
• Make a note of any situational changes in employee lifestyle; 
• Perform background checks on all new hires;
• Temporary staff should be adequately vetted and references followed-up; 
• Don't sign blank checks or take short-cuts with the authorization process to accommodate key staff absences; and
• Pay special attention to requests for urgent payment. 

 
During challenging times, remember, you are not alone. Understand your financial position. We SUGGEST that internal control procedures be reviewed now. Please contact us if you or anyone you know would like our assistance in reviewing internal controls. 
 
Best regards.
     Sincerely,
     GINSBERG & HELFER, PLLC
     Certified Public Accountants & Management Consultants
     Dalbert B. Ginsberg
     Alan S. Helfer
     Scott C. Boyd