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: ...

It’s not always easy being small. For one thing, small businesses (with fewer than 100 employees) experience higher occupational fraud losses: a median $150,000 vs. $140,000 for larger companies, according to the Association of Certified Fraud Examiners. That’s because they don’t always have the staffing or financial resources to implement fraud-prevention programs. Small businesses are also much more likely to fall victim to certain types of fraud — including check tampering and payroll schemes. Ask your advisor Private companies aren’t required to have annual audits, but your small business can still work with your CPA to determine where you might be at risk. He or she can train you to recognize the warning signs and help you reduce opportunities for fraud by, for example, segregating duties in...