Financial Fraud in Enterprises: Effective Control Solutions and Strategic Objectives
- phanhoainamba
- Jun 12
- 4 min read
Financial fraud poses a serious threat to businesses, causing losses of trillions of VND each year and eroding market credibility. Many Vietnamese enterprises have encountered financial fraud risks, ranging from check embezzlement to misstatements in accounting. To safeguard resources and ensure sustainable development, financial control has become an indispensable tool in corporate governance. This article analyzes the current state of financial fraud, proposes effective control solutions, and clarifies the strategic objectives of financial control.
Financial Fraud: A Hidden Threat Within Enterprises
Financial fraud refers to the intentional manipulation, concealment, or misuse of financial resources for personal gain, resulting in harm to the business. Common forms include:
Check or cash embezzlement: Sales staff who also handle cashier duties may take cash before it is recorded in the system—as seen in a Vietnamese retail chain that lost hundreds of millions of VND due to a lack of POS controls.
Misstatement in accounting: Accountants may record fake revenue or inflate costs, resulting in inaccurate financial reports.
Abuse of authority: Employees holding multiple roles (sales, cash handling, bookkeeping) can easily forge documents.
Non-transparent expenses: Marketing costs may spike without proportional results, such as businesses spending billions on advertising with no performance monitoring.
Consequences: Financial fraud not only causes asset losses but also undermines trust from investors, banks, and customers.
Objectives of Financial Control
Financial control is the process of establishing procedures, tools, and policies to monitor and manage cash flow, protect assets, and ensure the accuracy of financial information. The main objectives include:
Asset protection: Prevent losses caused by fraud—for example, secure check control systems or requiring dual signatures for large transactions.
Transparency assurance: Produce accurate financial statements in compliance with accounting standards (VAS, IFRS), enhancing credibility with shareholders and tax authorities.
Optimized cash flow: Monitor Days Sales Outstanding (DSO) to improve cash flow—for instance, reducing collection time from 60 days to 30 days.
Legal compliance: Meet regulations such as Decree 52/2021/ND-CP on financial management to avoid legal risks.
Strategic decision support: Provide reliable financial data for decision-making, such as cost analysis to maximize profitability.
Analysis: An effective financial control system not only prevents fraud but also helps businesses operate smoothly, increase productivity, and achieve long-term business goals.
Effective Financial Control Solutions to Prevent Fraud
To reduce financial fraud and enhance financial governance, businesses should implement the following solutions:
1. Clear Division of Duties
The principle of separation of duties is key to fraud prevention. For example, sales staff should not handle payments, and the accountant responsible for recording receivables should not manage cash. Recommended practices:
Establish an organizational chart with clearly separated roles, such as the sales team processing orders and the accounting department managing cash flow.
Require dual signatures on large transactions, including the business owner’s signature.
2. Adopt Management Technology
Use accounting software such as ERP or Power BI to automate processes, monitor cash flow in real time, and detect discrepancies. For example, POS systems in supermarkets record revenue instantly, reducing cashier fraud. Recommended practices:
Deploy management dashboards to monitor costs, revenue, and receivables.
Install antivirus software and control access to secure financial data.
3. Periodic Financial Statement Reviews
Conduct regular audits and reviews of financial statements to detect irregularities, such as cash accounts (accounts 111, 112) showing no credit entries, or mismatches in VAT input (account 133) compared to tax returns. Recommended practices:
Hire professionals or use review services to analyze tax-sensitive items.
Reconcile monthly bank statements to detect forged documents.
4. Build an Internal Control System
Develop an internal control system based on COSO standards, covering control environment, risk assessment, and operational monitoring. Recommended practices:
Draft standard procedures for the sales-to-cash cycle, such as using sequentially numbered purchase orders.
Train employees on professional ethics and financial regulations.
5. Strengthen Check and Cash Management
Tightly control checks using pre-numbered checkbooks stored in locked cabinets, and implement a “check invalidation” procedure. Recommended practices:
Assign check management to senior staff and do not share cabinet keys.
Regularly inspect check numbers to detect missing documents.
Analysis: These solutions must be customized to each enterprise's size and industry. SMEs can prioritize simple technology and task separation, while larger businesses may require a comprehensive internal control system. For example, a trading company should focus on POS and inventory reports, while a construction company needs project cost reviews.
Conclusion
Financial fraud is a “silent enemy” threatening business development, but a strong financial control system can serve as a solid “shield.” By clearly dividing duties, adopting technology, reviewing reports, and building internal controls, businesses not only prevent losses but also optimize profit and reputation.
Let W&A accompany your business in evaluating financial health, planning control systems, and taking action to expand your market presence!
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