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Red Flags for Potential Fraud

Posted by Admin Posted on Oct 30 2017

The most common phrase business owners or managers say after news comes out of an employee committing fraud at their workplace is “How did I not see this coming?”  Dealing with embezzlement is a messy situation.  Although our firm can handle these situations, we never want our clients to experience it.  In other words: We encourage all of our clients to be PROactive, not reactive!


How does fraud occur? Generally, it takes place when an individual with the ability to abscond with assets or manipulate financial statements and go undetected.  Most cannot rationalize taking money from their employer – but believe it or not it DOES exist!  A fraudster creates a justification for the actions they take (not enough pay, someone in their family is sick, etc.).  These things often occur due to inadequate or ineffective internal controls.  The list below is not intended to be looked at as all-encompassing or predictive of fraud, but they are the most common red flags seen during fraud investigations:


Employee with Longevity & Increasing Level of Trust

Employee that Does Not Take Vacations

Single Employee in Charge of Several Processes

Lifestyle Exceeding their Rate of Pay


Our firm’s goal is to help teach our clients how to spot these “red flags” and worry less about potential fraud.  Adequately functioning internal controls (both preventative and detective) are the best way to prevent fraud.  At the same time, an owner or manager can be mindful of telltale signs.  If someone in your organization exhibits these red flags, contact us today!

  We can help minimize your company's risk, protect your assets & avoid potential loss related to embezzlement or theft!  Lou Davis, CPA, CFSA, CGMA, Senior Audit Manager of Hyde & Company CPAs, has over 30 years of experience working closely with clients and handling many cases of fraud and embezzlement.  As a consultant and advisor, Lou can assist in making your internal controls more effective while creating new policies and procedures to implement in your workplace.

Please visit the archive for previous articles.

This blog site is intended for educational purposes directed towards our clients and provides general information about tax, accounting and business related topics.  It is not intended to provide professional advice.  We are not investment advisors. Accordingly, we suggest that you seek the advice of qualified investment advisors appropriate to each investment being considered. By using this blog site, you understand that there is no CPA/client relationship between you and Hyde & Company CPAs, P.C. or its employees.  The blog and website, including all contents posted by the author(s), should not be used as a substitute for competent counsel from a qualified advisor in your state.  Hyde & Company CPAs, P.C. posts are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes.  Tax rules are frequently changed, added, amended, and/or left to expire – always check with your CPA or accountant regarding the most current tax rules and how they apply to your specific tax issue

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