A study by the Association of Certified Fraud Examiners indicates that businesses with fewer than 100 employees are most at risk for employee theft. Also, the average loss per incident for small companies—$127,500—was actually higher than the average loss for larger companies. The high degree of trust often found in small companies makes them more vulnerable to dishonest employees. For example, in one small company, the employee responsible for paying bills would intentionally ask the owner to sign checks only when the owner was extremely busy. The employee would slip in one check that was made out to himself, and the owner didn’t notice because he was too busy to carefully review each check. Which principles of internal control should have prevented such fraud?
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