The High Cost of Fraud: Lessons from a Recent NZ Case and 10 Strategies to Protect Your Business

(This article was originally published on LinkedIn, the author has given his permission to share on this website)

A recent news article detailed the devastating impact of a trusted office worker stealing over $500,000 from a New Zealand family business. The theft not only caused the business to collapse but also cost many loyal employees their jobs. Unfortunately, this story is not unique. Fraud can strike businesses of all sizes, and all too often, the perpetrator is a long-standing, “trusted” employee—someone no one ever suspected.

This case serves as a reminder that personal trust alone should never be your primary defense against fraud. As an ex-auditor with extensive knowledge of financial risk management, forensic accounting, and internal controls, I’ve witnessed how easy it is for fraud to remain undetected when organisations rely on goodwill instead of robust processes. At Go Accounting, my team and I help businesses strengthen their defenses through financial risk reviews, process improvement consulting, and forensic accounting services.

Below are ten strategies to protect your business from fraud—even (and perhaps especially) when the individual in question is “part of the family” or has been on the team for years.

1. Segregate Duties and Establish Internal Controls

No single employee should be responsible for every step of a financial process. Combine proper segregation of duties (e.g., separating approval, payment, and reconciliation tasks) with robust internal controls, such as dual signatories and standardised authorisation protocols. By ensuring no one person holds too much power over the books, you reduce opportunities for fraudulent activity to go unnoticed.

2. Conduct Regular (and Surprise) Audits

Scheduled audits are useful, but unannounced spot checks can be even more effective. If employees know management may randomly scrutinise the books, they’ll think twice before attempting to manipulate records. Regular reviews also help detect errors or irregularities early, preventing small issues from snowballing into catastrophic losses.

3. Leverage Technology

Modern accounting software often includes audit trails, permission levels, and automated alerts that can flag unusual transactions. Embrace digital tools that track user activity, provide secure approval workflows, and reduce manual steps. The more transparent and traceable your transactions, the less room there is for fraud.

4. Foster an Ethical Culture & Whistleblower Policies

Fraud prevention isn’t just about systems—it’s also about culture. Leaders who model ethical behavior and encourage open communication create an environment where questionable activities are more likely to be reported. Implement a confidential whistleblower hotline or third-party service, and reassure employees that you take all reports seriously and protect those who speak up.

5. Conduct Thorough Background Checks

Even the most honest-looking applicant can hide a problematic past. Run background checks—including criminal, credit, and reference checks—particularly for roles involving financial responsibilities. While this won’t guarantee you’ll avoid future fraud, it does help mitigate the risk of onboarding individuals with a history of unethical behavior.

6. Rotate Roles and Enforce Mandatory Leave

In many fraud cases, the perpetrator actively avoids taking time off or delegating tasks because they fear someone else will notice the irregularities. Job rotations and mandatory vacations allow fresh eyes to review processes and spot inconsistencies. They also disrupt any long-running schemes that depend on a single person’s unchecked control.

7. Reconcile Accounts Frequently

Conduct frequent bank reconciliations, petty cash checks, and inventory tallies. The sooner you identify discrepancies, the quicker you can investigate and resolve them. A lapse of several months between reconciliations gives fraudsters ample time to cover their tracks—and to do more damage.

8. Look for Red Flags in Employee Behavior

It can feel uncomfortable to question the integrity of people you know well, but certain behaviors can be warning signs. Watch for sudden lifestyle changes (lavish spending without explanation), reluctance to share information, or defensive reactions when asked routine financial questions. While none of these automatically indicate wrongdoing, they are worth noting as potential red flags.

9. Prioritise IT Security

Fraud isn’t limited to paper checks and cash deposits. Cybercrime is on the rise, and poor IT practices can open the door to new types of fraud. Implement policies around:

Unique Logins – No shared user accounts; each person should have individual credentials and role-based permissions.

Secure Email Practices – Use business email addresses (not personal ones) for critical communications, and employ multi-factor authentication.

Data Management and Oversight – Restrict access to sensitive financial data and keep an audit trail of who views or modifies documents.

Regular Password Updates and Training – Educate staff on phishing scams, social engineering tactics, and safe web browsing.

10. Engage Professional Assistance

Even diligent business owners can overlook weaknesses in their systems. Financial risk reviews and forensic accounting services can spotlight vulnerabilities and help you strengthen your controls. As an independent team, we bring an objective perspective that can be hard to achieve internally, especially in close-knit organisations.

Final Thoughts

The heartbreaking collapse of a family business through internal fraud by a trusted employee underscores the importance of having robust preventive measures in place. Trust will always be a key component of any successful team, but “trust and verify” is the gold standard for protecting your business, your employees’ livelihoods, and your own hard-earned reputation.

If you’re concerned about potential fraud risks—or simply want peace of mind—get in touch with us at Go Accounting. We’re here to help you review, refine, and reinforce your financial processes, so you can focus on growing your business with confidence.