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Trust but verify is a motto Brett Newberry believes in. He had the quote, which was popularized by President Ronald Reagan, printed onto baseball caps to hand out to the audience of his recent talk on the importance of fraud prevention for small businesses.

The fraud doctor, as he鈥檚 known professionally, Newberry hails from Gallup where he works as a certified public accountant and a certified fraud examiner.

Newberry investigates fraud professionally, doing forensic accounting at Newberry & Associates, an accounting firm founded by his father.

鈥淲hat people have a hard time understanding is that any person is capable of fraud,鈥� Newberry said.

Circumstances in someone鈥檚 life may change. Financial issues, marital problems, gambling and drug issues can all lead someone to commit fraud, according to Newberry.

鈥淚鈥檝e dealt with people that when you talk to them, they seem normal like anybody, but they鈥檝e ripped off the organization for $500,000.鈥�

The average fraud is not sophisticated, said Newberry, but can be perpetuated because a company lacks internal controls, lacks a segregation of job duties, does not have proper training or does not follow its own policies. Small family-owned businesses can be especially susceptible to occupational fraud.

Occupational fraud is when someone who works for a business deceives its organization for personal gain, actions like embezzlement, cheating on taxes or lying to investors, according to the Association of Certified Fraud Examiners.

鈥淔rauds can be devastating from the standpoint of you鈥檙e wiping out a business or creating a real financial burden for the company, and there鈥檚 some real sadness that can come from it. Suicide, people going to jail, people getting divorced,鈥� said Newberry. 鈥淭he consequences can be devastating.鈥�

Not having enough staff to separate duties can lead to fraud.

鈥淵ou may have somebody that does payroll, but they also have access to the general ledger. That鈥檚 dangerous, because if you can do transactions on payroll and then you can go into the general ledger, then a lot of times you can hide what you鈥檙e doing.鈥�

Many businesses do not want to prepare for the possibility of fraud unless they鈥檝e had a major scandal. But an open culture that includes fraud training and being accountable can better prepare companies for potential fraud and can make it clear to employees that fraud is not acceptable.

鈥淚 am amazed the number of organizations that said they have a really good system of internal controls, but they don鈥檛 really test it, they don鈥檛 modify it, and they really don鈥檛 train to it, and a lot of times they will violate their own policy for convenience purposes and that鈥檚 like the worst thing you can do.鈥�

Internal controls can be tested by taking the policy and walking through transactions. For instance, a policy related to travel reimbursements could be tested by pulling a filed report and checking to see all of the documents are correctly filed and signed off on.

Widely available software that can produce bogus invoices has made it easier to perpetuate fraud related to expenses, said Newberry, making it a little more difficult to investigate.

鈥淵ou鈥檝e got to do some digging. Where鈥檇 they go? Did they go to a conference? What were the dates they were there? What city were they in? Because what happens when you鈥檙e committing fraud, it鈥檚 always hard to cover all of your tracks.鈥�

A big red flag is lifestyle choices that don鈥檛 make sense. Newberry said to pay attention to what kind of cars the person is driving, what kind of vacations they take, if they talk about gambling a lot or are bragging about purchasing high end liquors.

鈥淲hat happens, especially in these family businesses, is that you view everybody as like a family member and so a lot of times, a way a fraudster will cover what they鈥檙e doing is they鈥檒l say, 鈥榃ell you don鈥檛 trust me. I thought we were family,鈥� and most people get uncomfortable with that, and so they鈥檒l back down.鈥�

Newberry wants to make family business owners more comfortable saying, 鈥業 trust you, but I鈥檓 going to verify what you tell me because I have an obligation to the business.鈥�

Newberry spoke at the Parker Center for Family Business鈥� June lunch and learn. Every other month, the center offers a free lunch and learn as a resource for local businesses.