Bookkeeper Fraud

This article from the Tax Smart Australia Newsletter highlights the importance of reviewing the conrols around your bookkeeping process.

A national study into fraud by bookkeepers employed at small and medium-sized businesses has uncovered 65 instances of theft in more than five years, with more than $31 million stolen.

The study looked at criminal convictions recorded across Australian between January 2005 and March 2011. A total of $31,379,761 was stolen in that period at an average of $482,766 in each instance.

While we are constantly being told Australian has withstood the GFC better than most, cost of living pressures on families are immense.

Let’s be clear the overwhelming majority of bookkeepers are decent, honest people who exercise their duty of care to their employers or clients. However, as fraud is becoming increasingly prevalent, we suggest the following steps:

  • Establish a procedure policy for the receipt of payments ensuring an employee in addition to the bookkeeper reconciles amounts owing with customer ledger.
  • Limit the scope of financial transactions the bookkeeper can undertake solely (electronic bank transfers, BPay, sole cheque signatory).
  • Routinely, randomly examine financial transactions.
  • Beware the bookkeeper who insists on not delegating financial account keeping functions and rarely takes leave.
  • Keep a careful eye out for any unusual general ledger accounts to which your accounts payable system is posting.
The majority of fraud can be prevented with the right controls in place. It is prudent risk management to take the risk of fraud seriously. The cost of prevention is usually a fraction of the loss that is possible if the fraud was not prevented.Other ideas to minimise the likelihood of fraud:
      • The real danger involves the small business that has owners that take a weekly draw or wage and are very hands-on and heavy involved in the business,
      • Such people tend to develop faith in the bookkeeper relying on them because they can’t stand paper work,
      • Whilst the bookkeeper may be keeping the office organised and tidy, they may also be robbing the owner’s blind!
      • This is because the owners content with their weekly draw (for now) often do not conduct any checks,
      • At the very least request monthly Profit and Loss statements and balance sheets review,
      • You may have a limited understanding of Accounting but don’t be afraid to ask questions. At the very least this puts the bookkeeper on notice that you have an active interest in the firm’s finances,
      • Focus on sighting:

        – Bank balances (Reconciliations)

        – Aged Accounts Receivable lists

        – Aged Accounts Payable lists (Creditors)

        – Stock Levels (if applicable

        – Reconcile these back to the balance sheets.

If you would like to discuss the matters rasied in this article further, please do not hesitate to contact our office.

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