Fraud — whether it’s occupational or external — doesn’t just cause immediate financial losses. It can also reduce your company’s long-term value. For example, it could lower the price when you sell or limit the amount of capital you can raise via lenders and investors. Even poor internal controls can reduce your business’s worth. Here’s a brief overview of how valuation professionals assess fraud risk. Presence of internal controls Business value is a function of risk and return, and one critical risk factor companies face is fraud. Valuators conducting an appraisal might ask about a company’s internal controls — its policies and procedures to protect assets and ensure reliable financial statements. They often look for particular controls that have been proven to help prevent fraud, such as: ...
