Accountants need to play a key role in supporting business owners, particularly small-business owners to put in place systems to minimise the risk of fraud. They need to assist small-business owners to detect and avoid fraud.
Unfortunately, small businesses experience fraud losses at a rate of around 200 times that of larger businesses. Internal fraud is a big issue for small businesses with more than 50 per centof frauds involving losses of less than $100,000.
Many small businesses are susceptible to fraud because they lack the necessary accounting controls, usually allocate bookkeeping and accounts management responsibilities to one person, tend to place greater responsibility and trust in people and are less likely to be audited.
Business owners usually start their own business because they have a passion for something. Many do not have a lot of experience with finances, so they often hire a single person to take care of finances. To make things easier they also give this person access to the bank account. Fraud happens at small businesses mainly because responsibility is concentrated with one person.”
The most common types of fraud in SMEs include:
All accountants need to be trained to be able to assist business owners to better equip their operations to minimise fraud. There are some simple things business owners can do:
Accountants must be trained to probe, identify unusual activities, delve into the detail, and ask the difficult questions. When it comes to working with small businesses, accountants need to ensure a business is not only well structured and compliant but also minimising its risk of fraud.
Coco Hou, CPA, Managing Director, Platinum Accounting