Small businesses are not immune to employee theft and fraud, and in some ways, may be more vulnerable than larger companies. The trusting, familial characteristics that make a small business a pleasant place to work, sometimes contribute to an environment conducive to fraud.

According to the California Society of CPAs, the best way to prevent fraud is to create and enforce effective controls in all areas of potential exposure. Here are eight steps to get you started.

1. Hire The Right Employees. Prevention is always better than a cure. Be sure to screen potential employees thoroughly, checking past employment, personal and professional references and criminal records. This is especially important if the person will handle cash or inventory. You may even consider hiring a graphologist to determine if the potential employee is trustworthy and able to work in your environment.

2. Separate Accounting Duties. Many small businesses depend on one person to open mail, process payments, make bank deposits, pay invoices, handle petty cash and reconcile bank statements. This unrestricted access makes a business vulnerable. CPAs say it’s a good idea to divide accounting responsibilities so that no single individual controls all of the financial activity.

If your business doesn’t have sufficient personnel to separate duties, you can try rotating financial responsibilities every few months. In any case, make it a priority to actively understand and verify your business’s financial information.

3. Have Bank Statements Mailed To Your Home Or A Post Office Box. Review bank statements before your bookkeeper does. Be on the lookout for missing checks, checks that are out of order, checks written to suppliers or people you don’t know and checks made out to a third party but endorsed by someone in your company.

4. Arrange For Surprise Audits. Catching an employee off-guard can be your best defense in discovering fraud. Make it a regular practice to bring in a CPA once a year, at different times, to conduct a surprise audit of your company’s financial records. This makes it difficult for a dishonest employee to cover up his or her actions. In addition to uncovering fraud, the knowledge that the company conducts surprise audits can act as a deterrent.

5. Create An Ethical Work Environment And A No-Tolerance Culture. Set appropriate ethical examples for employees to follow and treat workers fairly and with respect. But don’t be too trusting — keep in mind that personal financial pressures can push even the most trusted employees to conduct fraud.

Through employee orientation, training, and other communications, make every employee aware of what activities constitute fraud, what the consequences are and what steps the business takes to detect fraud.

You should also let employees know what to do if they suspect fraud. Because most employees are reluctant to report suspicious activity, a third-party hotline can offer a level of anonymity that makes employees more willing to come forward.

6. Insist That All Employees Take Allotted Vacation Time. Research has shown that employees who are committing fraud sometimes resist taking a vacation because they must remain on the job to cover up their fraudulent activity. For some employees, just knowing they must take a vacation every year is enough of a deterrent.

7. Don’t Limit Your Focus To Financial Fraud. Theft of confidential information and trade secrets can be just as damaging to your business as embezzling funds. Enforce strict procedures for access to sensitive data. Buy a paper shredder and use it to destroy all confidential documents.

8. Consult with a CPA. CPAs can advise small business clients about measures to help prevent and detect internal fraud.