Small Business, Big Risk: Two Surveys Highlight Fraud Vulnerability. —JofA

Few Companies with Under 100 Employees Have Fraud Controls in Place

Small businesses are significantly more likely than their larger counterparts to neglect instituting basic antifraud controls that could save them from costly losses, a recent worldwide survey shows. The Journal of Accountancy reports in the August issue: 

Organizations with fewer than 100 employees were significantly outpaced by larger organizations in every fraud control measured in the Association of Certified Fraud Examiners (ACFE) 2012 Report to the Nations on Occupational Fraud and Abuse, which was released in May. The ACFE’s global fraud study found:

• Just 56% of organizations with fewer than 100 employees represented in the survey underwent external audits of their financial statements, compared with 91% of businesses with 100 or more employees.
• Employees received fraud training at just 18.5% of small organizations in the survey, compared with almost six in 10 larger organizations.
• Management certification of the financial statement occurred at 43% of small organizations in the survey, compared with 81% of larger ones.
• Formal codes of conduct existed at just 50% of organizations with fewer than 100 employees in the survey, compared with 90% of organizations with 100 or more employees.

“The percentage of small organizations that have formal controls in place is just so dwarfed by the large organizations,” Andi McNeal, CPA, the ACFE’s director of research, said. “And we noticed a real opportunity for small organizations to invest in simple measures, even a code of conduct, which frankly shouldn’t cost more than a handful of hours of employees’ time.”

The ACFE Report to the Nations was one of two studies released in May that provided substantial perspective on fraud. The AICPA’s 2011 Forensic and Valuation Services (FVS) Trend Survey found that demand for tech-savvy forensic and valuation CPAs is soaring as computers play an increased role in fraud.

Fraud Controls Help Small Businesses Hold Onto Their Treasures

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