Fraud is a serious risk in business—and especially in small and medium-sized businesses. In fact, as reflected in the Association of Certified Fraud Examiners’ global fraud survey, occupational fraud siphons astounding sums of money from businesses. In the most recent ACFE report, the median fraud loss for a business was $117,000.
Small businesses face unique risks, too. With fewer resources, smaller companies can be hit harder financially by fraud. In addition, certain frauds like check and payment tampering and skimming tend to occur more frequently at smaller businesses. In this article, we dive into how a certified fraud examiner can protect your business from fraud, lower risk, and benefit your bottom line.
What is fraud?
Let’s start with the basics. In this article, we are discussing “occupational fraud,” or crimes committed against a company by employees, directors, or officers. Small and medium-sized businesses are often more vulnerable to this type of fraud. This is because they typically have less formal or incomplete internal controls.
Internal controls are the procedures and processes a company implements to protect firm assets and ensure the integrity of financial reporting and regulatory compliance. Internal controls include preventive controls designed to stop problems before they occur and detective controls intended to identify problems when they occur. A simple example of a preventive internal control such as separation of duties is found where one employee cuts a check for an invoice, and a second employee reviews the invoice and signs the check. An example of a detective control, on the other hand, would be the reconciliation of cash balances to the bank statement provided by the bank at the end of the month.
Fraud is a widespread problem. For example, it can include asset misappropriation (or stealing assets from a company), bribery, kickbacks, bid-rigging, manipulation of financial statements, check and payment tampering, skimming and much more.
What is a certified fraud examiner?
Certified fraud examiners (CFEs) specialize in fraud prevention and mitigation. They are professionals who have earned certification from the Association of Certified Fraud Examiners (ACFE). They have significant expertise in areas such as fraud investigation, fraud risk management, laws relating to fraud, and conducting interviews.
What is the difference between a CPA and a CFE?
A certified public accountant (CPA) has earned licensure to practice public accounting in the United States (specifically in the state or jurisdiction of their license). The CFE designation is an internationally recognized designation. It indicates specialized expertise in fraud detection and deterrence. Also, it prepares the professional to prevent or investigate instances of business fraud.
What does a fraud examiner do?
A certified fraud examiner focuses on preventing, detecting, and/or deterring fraud in a business. A CFE may be engaged to assess if there is sufficient reason to believe that fraud has occurred or may be occurring in a business. Additionally, a CFE can also be engaged as a result of litigation or in advance of anticipated litigation. In performing their work, a certified fraud examiner may analyze financial statements, audit internal controls, interview witnesses and take statements, collect and examine evidence, draft reports, testify in court, and much more.
Benefits of hiring a certified fraud examiner
Hiring a certified fraud examiner can provide access to a unique set of professional expertise that can benefit your business. Common benefits include:
- Fraud risk mitigation. CFEs know what to look for to spot red flags in financial statements or internal controls to stop fraud before it starts, which can save your business thousands of dollars.
- Stronger internal controls. CFEs can bring valuable experience in designing and implementing strong internal controls to protect your employees and your business.
- Faster resolution. If fraud is committed, a CFE can help your organization navigate what happens next, including involvement from law enforcement, litigation, and resolution.
- Employee training. With their certification and specialized experience, CFEs can help to train your employees on how to prevent and detect fraud to reduce risk in your company.
Looking for a certified fraud examiner to protect your business? XPECT can help. XPECT is focused on helping businesses optimize business strategy, enhance operational effectiveness, and successfully leverage accounting as a strategic tool, so that business leaders can focus on the strategic aspects of growing the business and achieving business goals. Learn more.