Inadequate internal controls or policies. One person controlling both sales and receipts. Ignored employee complaints, suggestions, or comments. Large numbers of adjusting journal entries, especially at period end dates. Managers unfamiliar with warning signs.
Managers overly trust employees.
Management ignoring own controls and enforcement procedures. Indispensable personnel who arrive early and work late. Management unfamiliar with the actual fraud losses. Conduct quality background checks on your potential employees. Know what your losses are and develop a tracking system to identify when and how they occur.