Fraud Prevention Checklist

• Is ongoing anti-fraud training provided to all employees of the organization?
• Do employees understand what constitutes fraud?
• Have the costs of fraud to the company and everyone in it – including lost profits, adverse publicity, potential job loss, and decreased morale and productivity – been made clear to employees?
• Do employees know where to seek advice when faced with uncertain ethical decisions, and do they believe that they can speak freely?
• Has a policy of zero tolerance for fraud been communicated to employees through words and actions?
• Is an effective fraud reporting mechanism in place?
• Have employees been taught how to communicate concerns about known or potential wrongdoing?
• Is there a reporting channel, such as a third-party hotline, available to employees?
• Do employees trust that they can report suspicious activity anonymously and/or confidentially (where legally permissible) and without fear of reprisal?
• Has it been made clear to employees that reports of suspicious activity will be promptly and thoroughly evaluated?
• Do reporting policies and mechanisms extend to vendors, customers, and other outside parties?
• To increase employee perception of detection, are the following proactive measures taken and publicized to employees?
• Is possible fraudulent conduct actively sought out, rather than dealt with passively?
• Does the organization send the message that it actively seeks out fraudulent conduct through fraud assessment questioning by auditors?
• Are surprise fraud audits performed in addition to regularly scheduled audits?
• Is continuous monitoring software used to detect fraud and, if so, has the use of such software been made known throughout the organization?
• Is the management climate/tone at the top one of honesty and integrity?
• Are employees surveyed to determine the extent to which they believe management acts with honesty and integrity?
• Are performance goals realistic?
• Have fraud prevention goals been incorporated into the performance measures that are used to evaluate managers and to determine performance-related compensation?
• Has the organization established, implemented, and tested a process for oversight of fraud risks by the Board of Directors or others charged with governance (e.g., the audit committee)?
• Are fraud risk assessments performed to proactively identify and mitigate the company’s vulnerabilities to internal and external fraud?
• Are strong anti-fraud controls in place and operating effectively, including:
  • Proper segregation of duties
  • Use of authorizations
  • Physical safeguards
  • Job rotations
  • Vacations
• Does the internal audit department, if one exists, have adequate resources and authority to operate effectively and without undue influence from senior management?
• Does the recruitment policy include the following (where permitted by law)?
  • Criminal and civil background checks
  • Credit checks
• Are employee support programs in place to assist employees struggling with addiction, mental/emotional health, family, or financial problems?
• Is an open-door policy in place that allows employees to speak freely about pressures, providing management the opportunity to alleviate such pressures before they become acute?
• Are regular, anonymous surveys conducted to assess employee morale?