A recent article in the Journal of Accountancy discusses the importance or fraud prevention and detection that is important for businesses of all sizes. In the article, the individual was able to misappropriate $8 million all because he had the ability to request AND approve checks. Given the nature of many farmer’s operations, they may have a bookkeeper or a very small team helping with the accounting function where one person may have access to writing checks, approval and even recording transactions and this creates an opportunity for fraud to occur.
The most important control a smaller organization can have in place in management oversight of the day-to-day operations. For a farmer, this may include signing all checks, reviewing bank statements and cancelled checks, reviewing and approving invoices, etc. Reviewing periodic financial statement information is a great high level control that can highlight a problem areas. Even creating a budget and comparing actual results to the budgeted results is a great control. These may seem like time-consuming activities, but they are important controls in place that can help combat fraud and most likely will help operations as well.
As the organization grows and the control tasks need to be spread over other people, hiring competent and ethical employees and segregating duties between different people are two of the most important controls in preventing fraudulent activities.
Fraud is unfortunately something that you can never 100% protect you or your business from, but you can put procedures in place that will help to detect and hopefully deter it from happening. I would recommend discussing with a CPA if you have a question or concerns around this area in your business. Most importantly, never ignore it or think it can never happen to you.
Be prepared to take advantage of a possible soybean rally
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