Internal Controls
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Transcript of Internal Controls
Internal Controls from a Non-IT Perspective
Presented ByMichelle Pyan, LPI, MBA
Commercial Investigations LLC
September 22, 2011
Making Your Business Secure: What’s Enough?
His presentation
Check references and do background checks before hiring employees.• Your Employees• Your Client’s Employees
Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?
BACKGROUND INVESTIGATIONS
• Making the Case– Discourages Undesirable Applicant’s– Encourages Open Communication– Eliminates Uncertainty– Demonstrates Due Diligence– Promotes Workplace Safety– Excellent Return on Investment
BACKGROUND INVESTIGATIONSInternal Controls from a Non-IT Perspective
Making Your Business Secure: What’s Enough?
• ROI / Cost Benefit– Employee Pilferage– Commercial Bribery– Embezzlement– Vandalism– Burglary– Insurance/Workers Compensation fraud– Arson– Computer Fraud
BACKGROUND INVESTIGATIONSInternal Controls from a Non-IT Perspective
Making Your Business Secure: What’s Enough?
• Credit Reports– Determine if employee is living within their means– Deters employee fraud– Must be job related• Crucial for Payroll Handling Employees• Crucial for management or any other executive
involved in signing off on payroll documentation
Making Your Business Secure: What’s Enough?
BACKGROUND INVESTIGATIONSInternal Controls from a Non-IT Perspective
• Drug Testing– Employee Habits Such as Drug Abuse can
Induce Fraud– A Complete Background Check will Include
a Drug Test
Making Your Business Secure: What’s Enough?
BACKGROUND INVESTIGATIONSInternal Controls from a Non-IT Perspective
PAYROLL FRAUD
• Ghost Employee• False Wage Claim• False Expense
Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?
PAYROLL FRAUD
• Ghost Employee– What
Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?
PAYROLL FRAUD
• Ghost Employee– How• Add to Payroll• False Time Sheet• Issue Wage Payment• Collect the Payment
Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?
PAYROLL FRAUD• Ghost Employee– Prevent• No Cash Payments• Supervisors Approve Payroll• Add Employees Only with Approval• Performance Reviews Based on Payroll Register• Rotate Responsibility for Payroll Functions• Have Management Check the Payroll
Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?
PAYROLL FRAUD
• False Wage Claim– What
Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?
PAYROLL FRAUD
• False Wage Claim– How• Altering Time Sheets
– How are the Hours Recorded
Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?
PAYROLL FRAUD
• False Wage Claim– Prevent• Move Employees to Salary• Strict Controls on Overtime• Control the Recording of Hours Actually Worked
Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?
PAYROLL FRAUD
• False Expense– What• Mischaracterized Expenses• Inflated Expenses• False Expenses• Multiple Claims
Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?
PAYROLL FRAUD• False Expense– How• Mischaracterized Expenses• Inflated Expenses• False Expenses• Multiple Claims
Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?
PAYROLL FRAUD• False Expense– Who• Employees who are Reimbursed• Employees that Process Expense Claims
Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?
PAYROLL FRAUD• Lessons Learned– Not all Frauds Involve Employees Directly Stealing
Money or Assets– Not all Frauds Occur Once and in Large Amounts– Employees Charged with Protecting the Payroll
System are Best Placed to Defraud the System and Hide the Evidence
Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?
PAYROLL FRAUD• Anonymous Hotlines– More Frauds are Uncovered via Tips than any
other Method– Accidental Discovery is the Second Most Common
Method of Detecting Fraudulent Activity
Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?
CLIENT VETTINGDoes the company exist in state corporate records?Is the signatory a principal of the company?
Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?
• Tips– Cursory searches • White Pages• Google• Pipl• Etc. . . .
– Experian Biz Apps Reports– Third Party Site Inspection
CLIENT VETTINGInternal Controls from a Non-IT Perspective
Making Your Business Secure: What’s Enough?
CLIENT VETTING
Screen your prospects.
Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?
QUESTIONS AND ANSWERSInternal Controls from a Non-IT Perspective
Making Your Business Secure: What’s Enough?
DISCLAIMERThe information provided in this presentation does not constitute legal or accounting advise. It is for information and discussion purposes only. This presentation may not be reproduced without the written consent of the author.
Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?
THANK YOU!Michelle L. Pyan, LPI MBA
PresidentCommercial Investigations LLC
Licensed Private Investigative Agency
www.commercialinvestigationsllc.com(800) 284-0906
Internal Controls from a Non-IT PerspectiveMaking Your Business Secure: What’s Enough?