Fraud and theft start small.

It starts small and just gets bigger and bigger, until someone notices.

Nearly all the grief our profession has been getting lately stems from the giant fraud schemes and audit failures that make the front page of your daily paper. We read the articles and think they don't apply to

According to the Association of Certified Fraud Examiners, the average organization loses six percent of revenue, or $9 per day per employee, to fraud and abuse. Think about how many sales it takes to recoup that. So why don't we realize the magnitude of these losses? Because they're scattered all over the financial statements.

A little T&E abuse, inventory that walks off, a purchasing agent who has a "special" arrangement with a vendor or a bogus vendor, a salesman who gets bargain prices on purchases because he's giving unnecessary discounts on your product or service--that's all it takes for fraud to invade your company.

Making It Worse

If we grouped all these losses in a line item on the financial statements called "Fraud, Theft & Abuse," we'd pay attention. Unfortunately, we make things worse. How? If our company takes inventory, what do we call missing inventory? "Shrinkage." The inventory doesn't shrink; someone stole it, or it was ruined or given away. Then we compound the problem by burying the missing inventory in Cost of Goods Sold. But it wasn't sold.

Some employees feel justified in taking advantage of a company. Why? Because times are tough and a few friends have been "downsized," and everyone is doing multiple jobs for no increase in pay, while the owner is still living as though nothing has changed. Employees become resentful, and a few will even figure out a way to get even.

Behaviors That Drive Fraud and Abuse

So how do you minimize the probability that your company or firm will fall prey? One way is not to hire employees who will steal you blind. You should do background checks on any employee who can do you harm, especially those with access to assets.

* Do a criminal background check.

* Perform a civil background check. People who are being sued are more likely to do you wrong.

* Check driving records. People who get lots of traffic tickets sometimes like to see if they can break the rules without getting caught.