Internal control/anti-fraud program design for the small business : a guide for companies not subject to the Sarbanes-Oxley Act

219 Pages·2015·41.17 MB·English

by  Dawson

Internal Control/
Anti-Fraud Program
Design for the Small Business
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Internal Control/
Anti-Fraud Program Design
for the Small Business
A Guide for Companies NOT
Subject to the Sarbanes-Oxley Act
STEVE DAWSON
Cover image: © Sergey Nivens/Shutterstock
Cover design: Wiley
Copyright © 2015 by Steve Dawson. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data:
Dawson, Steve, 1962–
Internal control/anti-fraud program for the small private business : a guide for
companies not subject to the Sarbanes-Oxley Act / Steve Dawson.
pages cm. — (Wiley corporate F&A series)
Includes index.
ISBN 978-1-119-06507-4 (hardback); ISBN 978-1-119-08372-6 (ePDF);
ISBN 978-1-119-08371-9 (ePub); ISBN 978-1-119-08373-3 (obook)
1. Fraud—United States—Prevention. 2. Small business—United States—
Auditing. I. Title.
HV6691.D39 2015
658.4′73—dc23
2014049431
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
To my wonderful wife, Ebeth, the matriarch of our incredible family
and the strongest person I have ever known. Without your constant
support, this work would have never become a reality.

Contents
Preface: Maybe It’s Time We Get Back to the Basics xi
Acknowledgments xvii
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THE FOUNDATION, THE GROUND FLOOR
Chapter 1: The Architect’s Blueprint:
Establishing the Framework 3
The Elements of Anti‐Fraud Program Design 3
Anti‐Fraud Environment 4
Fraud Risk Assessment 4
Control Activities 5
Information: Program Documentation 6
Communication: The Company Fraud
Training Program 6
Monitoring and Routine Maintenance 7
Chapter 2: Foundational Policies: The Fraud Policy 9
Foundational Policies 10
The Fraud Policy: The Essential Elements of an
Effective Fraud Policy 10
Case Presentation 17
Chapter 3: Foundational Policies: The Fraud Reporting Policy 19
The Essential Elements of an Effective Fraud Reporting Policy 20
vii
viii ◾ Contents
Chapter 4: Foundational Policies:
The Expense Reimbursement Policy 29
Case: “No Questions Asked” 29
Case: “It Will Never Be Missed” 30
Case: Larry the Chief Financial Offi cer 31
The Elements of an Effective Expense Reimbursement Policy 32
Appendix 4A: Expense Report Form 39
Appendix 4B: Supplemental Business Meal and
Entertainment Charges Form 40
Chapter 5: The Ground Floor:
The Fraud Risk Assessment Process 41
Ground Rules for Fraud Risk Assessment 42
An Example of Risk Assessment 43
Procedural Steps for Performing a Fraud
Risk Assessment 44
Cash in Bank 48
Case: The Trail Is Gone 50
Case: Friends in Low Places 51
Asset Misappropriation 52
Corruption 53
Financial Statement Fraud 53
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RAISING THE WALLS
Chapter 6: Control Activities: The Absolutes 57
Critical Principles of Control Activity Design 57
Foundational Control Activities 59
Case: The Mail Drop in Las Vegas 64
Appendix 6A: Confl ict of Interest Form 67
Appendix 6B: New Vendor Establishment Form 68
Chapter 7: Control Activities:
The Segregation of Duties Dilemma 69
But I Only Have Two Employees 69
Prevention versus Detection Controls 70
The Necessary Review Processes 72