2. Small Business • Business risks – • Competition • Economy • Rising costs • Don’t forget fraud • Average business will lose 5% of revenue to employee theft (ACFE)

3. Fraud in Small Business • Billing • Check fraud • Skimming cash • Payroll • Employee theft • Embellished expense reports

4. Family-Owned Business • Family-owned business risks • Same as small business – only more complicated • Family-owned business fraud • Same as small business – only more complicated • “Jack of All Trades, Master of None” • Sense of duty has declined while sense of entitlement has grown

5. Why Internal Control? • Reduces your risk of fraud • Protects your assets • Banks and lenders require • Accurate (and timely) financial reporting • Increases efficiency in your growing business • Reduces costs – tax and audit

6. Strengthen Internal Controls • It does not need to be costly • Focus on your biggest risks first • Always keep the characteristics of fraud in mind • Install and monitor controls • Internal controls are a process

7. Strengthen Internal Controls • Segregation of Duties • Separate recording, authorizing, and reviewing • Should be designed for your organization • Technology • Direct correlation between technology and fraud • Technology is not static • Communication

8. Specific Controls • Avoid signature stamps if possible • Dual signatures on checks • Review payroll registers • Set expectations, guidelines, and lines of communication = build trust • Trust is important but it is not a control

9. Ask Yourself… • What are our biggest risks? • What is the most effective way to reduce risk? • What is the most efficient use of our resources?

10. Questions? Jennifer Files, CPA jennifer.files@yhbcpa.com Yount, Hyde & Barbour, P.C. 50 South Cameron Street Winchester, VA 22601 (540) 662-3417