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Internal Control/Anti-Fraud Program for the Small Private Business: A Guide for Companies NOT Subject to the Sarbanes-Oxley Act


This book covers all elements of an internal control structure applicable to the small business community. It is intended for those businesses for which the Sarbanes-Oxley Act does not apply (non-public businesses). Fraud cases are used throughout the book that provide an analysis of the internal control weaknesses that led to a specific fraud. Each case study also includes relevant controls that could have served to reduce the probability of the occurrence of the fraud. The controls are then summarized according to the five elements of an internal control structure for purpose of assisting in documenting the ultimate anti-fraud program. The steps provided in this book provide readers with a “how to” design and implement an effective and efficient internal control structure/anti-fraud program tailored to their specific needs.

Preface: Maybe It’s Time We Get Back to the Basics

Anti-Fraud Program Design for the Small Business

“Small Business” Defined

The Anti-Fraud Program Structure


Part  I: The Anti-Fraud Environment: The Blueprints, The Foundation, The Ground Floor

Chapter 1: The Architect’s Blueprint: Establishing the Framework

The Elements of Anti-Fraud Program Design

Anti-Fraud Environment

Fraud Risk Assessment

Control Activities

Information: Program Documentation

Communication: The Company Fraud Training Program

Monitoring and Routine Maintenance

Chapter 2: Foundational Policies: The Fraud Policy

Foundational Policies

The Fraud Policy: The Essential Elements of an Effective Fraud Policy

Case Presentation

Chapter 3: Foundational Policies: The Fraud Reporting Policy

The Essential Elements of an Effective Fraud Reporting Policy

Chapter 4: Foundational Policies: The Expense Reimbursement Policy

Case: “No Questions Asked”

Case: “It Will Never Be Missed”

Case: Larry the Chief Financial Officer

The Elements of an Effective Expense Reimbursement Policy

Appendix 4A: Expense Report Form

Appendix 4B: Supplemental Business Meal and Entertainment Charges Form

Chapter 5: The Ground Floor: The Fraud Risk Assessment Process

Ground Rules for Fraud Risk Assessment

An Example of Risk Assessment

Procedural Steps for Performing a Fraud Risk Assessment

Cash in Bank

Case: The Trail is Gone

Case: Friends in Low Places

Asset Misappropriation


Financial Statement Fraud

Section II: Anti-Fraud Control Activities: Raising the Walls

Chapter 6: Control Activities: The Absolutes

Critical Principles of Control Activity Design

Foundational Control Activities

Case: The Mail Drop in Las Vegas

Appendix 6A: Conflict of Interest Form

Appendix 6B: New Vendor Establishment Form

Chapter 7: Control Activities: The Segregation of Duties Dilemma

But I Only Have Two Employees

Prevention verses Detection Controls

The Necessary Review Processes

Chapter 8: Control Activities: General Processes

Two Operational Questions

Common Control Activities

Case: The Cell Phone Reimbursement

Chapter 9: Control Activities: Specific Control Areas

Financial Statement Line Item Control Activities

Section III: Completing the Anti-Fraud Program: The Ceiling, the Roof, and Routine Maintenance

Chapter 10: The Ceiling: Documenting the Anti-Fraud Program


Documentation – Keeping it Simple

The Elements of Quality Documentation

Chapter 11: The Ceiling: The Company Fraud Training Program

The Elements of Effective Communication

The Company Fraud Training Program

Chapter 12: The Roof: Monitoring and Routine Maintenance

Monitoring and Routine Maintenance Defined

The Monitoring and Routine Maintenance Structure

Chapter 13: The Sample Anti-Fraud Program

Appendix 13A: Fraud Risk Assessment Framework Form

Appendix 13B: Control Activities Form

Appendix 13C: Documentation of Control Activities

Appendix 13D: Compliance Audit Programs and Related Compliance Audit Working Papers

Section IV: Appendices

Appendix A: The Fraud Policy

Sample Fraud Policy

Sample Fraud Policy

Sample Fraud Policy

Appendix B: The Fraud Reporting Policy

Sample Fraud Reporting Policy

Sample Fraud Reporting Policy

Appendix C: The Expense Reimbursement Policy

Sample Expense Reimbursement Policy

Sample Expense Reimbursement Policy

Appendix D: Fraud Risk Assessment Framework Form

Appendix E: Control Activities Documentation Form

Appendix F: New Vendor Establishment Form

Appendix G: Compliance Audit Program

Appendix H: Compliance Audit Working Paper

Appendix I: Conflict of Interest Form

About the Author