    Here is a scary scenario: Your company uses an automated payroll system linked directly to your bank account. Twice a month, your trusted bookkeeper logs on to the system, enters the appropriate amount of hours for each employee, and then directs your bank to issue paychecks or directly deposit funds into everyone's account. It's fast, efficient, and spares you the aggravation of dealing with it yourself. Unfortunately, your trusted bookkeeper has added a few "ghost employees" to your payroll and diverted the funds into her own account every pay period. Over the past year, she's managed to steal thousands of dollars from your company with just a few strokes of her keyboard.
   Does this scenario sound far-fetched? Couldn't happen to me, you say? Maybe you think she couldn't pull it off because she'd need real employee tax information for withholding purposes. Well, she's thought about that too. First of all, she can issue duplicate checks to real employees and simply change the account information for direct deposit. Secondly, she could easily keep a terminated employee on the books, again changing the account number. If she has enough employees to choose from, she can overpay each in small amounts, making it hard to notice the discrepancy. As long as she has little to no oversight, it's fairly easy to pull this scheme off. In fact, it is a common form of embezzlement.
  So how do you prevent this type of fraud? The same way most business fraud is prevented:
1. Screen your employees before hiring them. In many instances, a thorough background check will reveal this type of behavior before it's too late.Â
2. Institute a system of checks and balances. No one employee should be in a position of trust so complete that they have no oversight. A regular reconciliation of payroll records and bank statements should easily detect the scheme described above.Â
3. Conduct surprise audits. Bring in outside help to occasionally review the books. Sometimes just the existence of such a practice can deter fraud.Â
4. Carefully review all W-2 and 1099 information. Payroll schemes are most often detected when overpayments are discovered at tax time.Â
  Payroll fraud is one of the most common forms of embezzlement. Carefully review your company's records to ensure that ghost employees are not scaring away your profits.
   Does this scenario sound far-fetched? Couldn't happen to me, you say? Maybe you think she couldn't pull it off because she'd need real employee tax information for withholding purposes. Well, she's thought about that too. First of all, she can issue duplicate checks to real employees and simply change the account information for direct deposit. Secondly, she could easily keep a terminated employee on the books, again changing the account number. If she has enough employees to choose from, she can overpay each in small amounts, making it hard to notice the discrepancy. As long as she has little to no oversight, it's fairly easy to pull this scheme off. In fact, it is a common form of embezzlement.
  So how do you prevent this type of fraud? The same way most business fraud is prevented:
1. Screen your employees before hiring them. In many instances, a thorough background check will reveal this type of behavior before it's too late.Â
2. Institute a system of checks and balances. No one employee should be in a position of trust so complete that they have no oversight. A regular reconciliation of payroll records and bank statements should easily detect the scheme described above.Â
3. Conduct surprise audits. Bring in outside help to occasionally review the books. Sometimes just the existence of such a practice can deter fraud.Â
4. Carefully review all W-2 and 1099 information. Payroll schemes are most often detected when overpayments are discovered at tax time.Â
  Payroll fraud is one of the most common forms of embezzlement. Carefully review your company's records to ensure that ghost employees are not scaring away your profits.