One of the most basic and often used systems to reduce and detect financial fraud is by using a system of checks and balances. While this is great, the one problem with a system of checks and balances is that some companies never follow it. Purchase requisitions, payroll, and other tasks that require authorization all fall onto the shoulders of a single or a couple people in most companies. The majority of businesses are usually small and so most of the time the person or people in the human resources department end up perform multiple duties. This type of process counteracts the basic principles and rules that a check and balance system would put into place. Too much power is placed into the hands of a single or couple individual and from there they will be able to manipulate and cover up the data that would incriminate them. So is there a way to prevent fraud from happening in situations like this? The best way is to make sure that the upper management team works closely with the people doing these tasks. It is a hard balancing act since you do not want to make them feel that they are not trusted.
Reference: http://www.abfjournal.com/articles/minimizing-fraud-checks-balances-vigilance-go-a-long-way/