Internal fraud can have a devastating effect on companies, especially small ones. Unfortunately it's the small companies that are at the most risk for employee theft and are also hit the hardest by it. According to the statistics from the ACFE 2012 Report to the Nations, the smallest organizations in the study suffered the largest median losses.

There are several reasons for this. Small business typically:

• Don't have internal controls in place
• Have fewer employees who perform more functions
• Lack formal policies and procedures
• Have a small number of employees who are trusted

Unfortunately, small businesses are also most likely to be bankrupted by internal fraud, as they typically have smaller cash reserves and are less likely to have insurance coverage for fraud losses.