Fraud control isn’t just for large enterprises. Small and mid-sized organizations across the greater Raleigh area face real fraud risk—from both internal and external sources—and the impact lands directly on cash flow, financial statements, and customer trust. The good news is that with practical anti-fraud controls, businesses can significantly reduce losses and speed fraud detection.
Join the small business accountants from Steward Ingram & Cooper, PLLC in Morrisville, NC, as we explore anti fraud controls you can implement now—how to prevent and detect fraud, tighten internal controls, and protect cash flow across your Raleigh–Durham organization.
Table of Contents
What Are Anti-Fraud Controls?
Anti-fraud controls are policies, procedures, and systems designed to prevent, detect, and respond to fraudulent activity. Effective programs blend people, processes, and technology so no single person controls a transaction end-to-end, anomalies are surfaced quickly, and corrective action is taken when issues occur.
Internal vs. External Fraud (and Why Both Matter)
A business can experience both internal and external fraud.
Internal fraud is an example of:
Asset misappropriation:
Skimming cash, payroll schemes, false expense reports.
Billing and vendor schemes:
Shell vendors, conflicts of interest.
Financial statement manipulation:
Misstating revenue, concealing liabilities.
External fraud includes schemes like business email compromise (BEC), account takeover, false invoices from impostor vendors, and payment diversion—often enabled by social engineering or compromised credentials.
ACFE’s 2024 occupational fraud study shows internal controls and management review are critical defenses across these patterns. The study also links stronger controls to shorter scheme duration and lower median losses. In practice, that means simple, high-yield steps can help management reviews surface issues earlier and prevent small anomalies from becoming incidents that cost a business tons of money.
Common Anti-Fraud Controls for Businesses to Implement Now
Strong anti-fraud controls help small businesses safeguard cash, data, and vendor payments. Practical steps create checks that make it harder to commit fraud and easier to spot issues early. These internal controls to prevent fraud scale with your headcount and systems, reducing risk without slowing day-to-day operations.
Code of Conduct
A written standard that sets expectations for ethical behavior, conflicts of interest, gifts, and reporting responsibilities—foundational to anti fraud management. Employees, vendors, and contractors attest to the policy; leaders model compliance; HR reinforces it in onboarding and annual refreshers. Clear consequences and an easy way to report concerns make this one of the most common anti-fraud controls organizations can implement immediately.
External Audit of Financial Statements
An external audit of financial statements allows an auditor to assess risk, test transactions and balances, and evaluate internal controls to prevent fraud and detect material misstatement—giving business owners and boards objective insight into fraud risk and control effectiveness.
Segregation of Duties (SoD)
When the same person requests, approves, records, and reconciles a payment, fraud risk spikes. Separate authorization, custody, recording transactions, and reconciliation across different people or roles. If headcount is tight, use compensating controls: owner review of bank activity, dual approval for changes to vendor master data, rotating duties, and independent monthly reconciliations.
Management Review and Reconciliations
Use routine, documented reviews of bank recs, AR/AP agings, vendor changes, credit memos, write-offs, and manual journal entries. Require reviewers to initial and date workpapers and follow up on exceptions. These fraud controls help detect unusual trends before financial losses grow.
Vendor and Purchase-to-Pay Controls
Adopt 3-way match (PO, receipt, invoice), restrict vendor creation to specific roles, require dual approval for new vendors or changes to payment details, and maintain an approved vendor list. Periodically screen vendors for duplicates, related parties, or PO box risks. This is one of the most effective internal controls to prevent fraud in small companies.
Cash Disbursement and Banking Safeguards
Use positive pay, ACH blocks/filters, separate accounts for payroll/operating, and daily online review of cleared items. Lock down check stock, require dual signatures over a set threshold, and disable paper statements. Preventive controls here directly reduce the likelihood that funds are paid to the wrong party.
Access Controls in Accounting/ERP and Cloud Apps
Apply least-privilege access, MFA, and role-based permissions. Prohibit shared logins. Review access quarterly and remove dormant accounts immediately. Combine with IT change-management so users cannot both change configurations and post transactions.
Whistleblower Hotline and Speak-Up Culture
Tips are the most common detection method—responsible for 43% of discovered cases in ACFE’s 2024 study. Offer anonymous, retaliation-free channels (hotline, web portal, QR code) and train employees, vendors, and customers to use them. Organizations without hotlines tend to suffer higher losses and longer schemes.
Fraud Risk Management Technology
Start simple with bank-feed reconciliations, role-based access, and exception reports. As you grow, consider proactive data analytics in your accounting system and—where justified—lightweight machine learning tools that flag anomalies (unusual vendors, out-of-policy spend). Surveys show exception reporting/anomaly detection are the most common analytics techniques, with increasing adoption planned.
Fraud Awareness Training
Tips are the most common detection method—responsible for 43% of discovered cases in ACFE’s 2024 study. Offer anonymous, retaliation-free channels (hotline, web portal, QR code) and train employees, Provide targeted training for employees, managers, and owners on red flags, conflicts of interest, gifts/entertainment rules, and your code of conduct. Reinforce how to report concerns and why early reporting protects the company and customers., and customers to use them. Organizations without hotlines tend to suffer higher losses and longer schemes.
Periodic Fraud Risk Assessment
At least annually, identify high-risk processes (cash receipts, AP, payroll, inventory), determine inherent risk, list preventive controls and detective controls already in place, and document residual risk requiring additional action. Many organizations now perform enterprise-wide assessments each year.
Proactive Data Monitoring and Surprise Audits
Proactive data analysis (exception reports, trend analysis) and surprise audits are associated with shorter scheme duration and materially lower losses. Even simple tests—duplicate payments, round-dollar invoices, weekend entries, rapid vendor detail changes—can surface issues early.
How Internal Fraud Control Function Throughout Your Business
Internal fraud controls touch every workflow—from sales and cash receipts to purchasing, payroll, and the monthly close. Whether your business has been operating for years or you are a startup just learning about the need for anti fraud controls, there are many financial strategies that can reduce opportunities to commit fraud and flags issues early.
Revenue and Cash Receipts
Strong controls here ensure every dollar invoiced is recorded, deposited promptly, and reconciled so skimming, lapping, and unauthorized write-offs are prevented or quickly detected.
Preventive controls:
Segregate mail opening from posting; lockbox services; daily deposit requirements.
Detective controls:
Reconcile POS/merchant activity to bank; review credit memos/voids by user; analyze days-sales-outstanding trends.
Proactive measures:
Exception dashboards for same-day voids after close, unusual discounts, or negative AR balances.
Purchasing and Disbursements
These safeguards ensure funds leave the company only for approved purposes, to validated vendors, and in the correct amounts and accounts.
Preventive controls:
Approved vendor list, dual approval, 3-way match, positive pay.
Detective controls:
Duplicate payment scans, monitoring changes to vendor bank accounts, review of off-cycle checks.
Proactive measures:
Quarterly vendor master file review for related parties/duplicates.
Payroll
Payroll controls protect against ghost employees and unauthorized pay changes so wages paid align with authorized work and headcount.
Preventive controls:
HR owns new-hire/termination; payroll changes require dual approval; separate preparer/approver.
Detective controls:
Ghost-employee checks, reasonableness tests on overtime and rates, variance review vs. budget.
Financial Close and Reporting
Close and financial reporting controls create a documented, reviewed trail from subledgers to the general ledger so irregular entries and errors surface before statements are issued.
Preventive controls:
Close checklist with responsibilities and due dates; documented JE policies; enforce “no same person” rule for preparing and approving entries.
Detective controls:
Analytical reviews of margins, flux analysis by account, roll-forwards for inventory and fixed assets; external review/audit where appropriate.
What To Do When Fraud Is Detected In Your Small Business
Even strong systems can face attempts to commit fraud. Here’s a compact plan to protect evidence and take corrective action without disrupting operations.
Step 1: Preserve Evidence
Secure the documentation of digital logs, bank records, vendor files, emails, and device access. Pause automatic deletion and version-history pruning.
Step 2: Limit Access
Remove system permissions for implicated users, rotate credentials, and freeze vendor payment changes until verification.
Step 3: Independent Review
Assign an impartial reviewer or engage outside support to conduct an initial fact-finding, then determine whether a formal investigation is needed.
Step 4: Reporting and Remediation
Document what occurred, which controls failed, and the financial impact. Update policies, provide remedial training, and consider amending financial statements if required by applicable laws and GAAP. ACFE data shows median schemes often run for 12 months before discovery, underscoring why quick escalation, investigation, and enhanced monitoring matter.
Anti-Fraud Controls for Small Businesses FAQs
Do companies face more internal or external fraud?
Both are significant. Internal schemes (asset misappropriation, corruption, financial statement fraud) remain common, and external threats like BEC keep rising. Strong internal controls, hotlines, and management review reduce losses regardless of the source.
What are the two most common anti-fraud controls in organizations?
Across investigated cases, organizations most frequently had codes of conduct and external financial statement audits in place. Pair these with proactive data monitoring, surprise audits, and training for best results.
How often should we perform a fraud risk assessment?
At least annually—or when processes, systems, or staffing change materially (e.g., new ERP, rapid hiring, remote work expansion). Many organizations run an enterprise-wide assessment every 12 months.
Do small businesses really need a fraud hotline?
Yes. Tips are the leading detection method, and hotlines are associated with lower losses and faster detection. Affordable options exist for small teams.
What is “control fraud”?
The phrase is sometimes used to describe fraud enabled by those who control the organization (e.g., overriding controls to commit fraud). Clear governance, independent oversight, and external audit help counter this risk.
Contact Form
We would love to hear from you! Please fill out this form and we will get back to you shortly.