Employees commit fraud in every company

Fraud Prevention Techniques

Employees commit fraud in every company regardless of its size, industry, type and location. Most managers like to believe that the employees are working in the best interest of the business, and although that could be the case at times, it’s not always like that.

There are many reasons why an employee would go to the extreme end of committing a fraudulent activity in the company. According to the Occupational Fraud and Abuse report published sometime ago, average organization suffers a loss of about 5% of its revenue in fraud each year.

Every organization must have a plan to detect and prevent these fraudulent activities. It is crucial for the company to be able to prevent frauds in order to save the organization from losses. A strategic plan enables the company to operate at its finest without the fear of exposure to unwanted attention. Anyone in the company can commit fraud and having controls can prevent this from happening.

Frauds are of many types. Even a small mishandling of data can be termed as fraud if it breeches a company’s law. Things like giving out company’s confidential data and quoting the wrong price of tender is considered as fraud. Apart from these, frauds are of three types: corruption, financial statement fraud and asset misappropriation.

Asset misappropriation fraud makes up to 90% of all the fraud cases. These are frauds committed by the employees who steal company’s assets before or after it’s been recorded, such as cash. Stealing other non-cash items and assets from the organization is another asset theft committed by employees.

Another way this fraud can be committed is by the fictitious expense reimbursement claim made by the employees. The expense is not very high but this cannot be ignored either.

Financial statement fraud results in the highest median losses faced by companies. Although only 5% of cases are reported in this type of company fraud, the losses recorded have been high. Employees follow schemes where they intentionally misstate information in the company’s financial reports.

These schemes involve inflated asset valuation and big liabilities hidden with fictitious revenues. The company suffers from a very instable financial situation and can fall anytime soon.

Corruption is a white collar crime committed by employees to gain interest, bypassing their duties to the company and the employer. Corruption is done by taking bribery, conflict of interest and extortion. Employees who are corrupt and are able to influence deals using their authority are the main culprits. They can influence business deals and manage to make some extra illegal cash from under the table.

It is important for companies to have fraud prevention techniques in place in order to ensure maximum security for the company and the employees. A fraud can take 18 months to get detected and this can mean huge losses for the company. Luckily, there are a few fraud prevention techniques that companies can implement to ensure minimum frauds and maximum security.

Employees who commit frauds can be identified by their behavioral traits. Getting to know your employees can help you identify potential scammers. Any change in the behavior of the employee can be an indication that something is wrong. A change in attitude can also indicate an internal issue that must be addressed.

Revenge can be a basis for someone to commit fraud. An employee who does not feel appreciated by their bosses can lead them to commit some type of fraud.

An employer must pay close attention to someone who hasa change in attitude. Following the steps of the employee and noticing every move can prevent any potential fraud from happening. Taking these steps will not only save the organization but will also help the company to become a better place with happier employees.

An employee who feels appreciated by their employer is an employee who is likely to be more trustworthy and loyal.

Company owners must ensure that their employees are being heard. Listening to the employees can reveal so much about the company and what it lacks. The problems faced by the employees must be addressed immediately as they are the backbone of the organization. Consider a situation where an employee who used to work 40 hours a week but is now working 65 hours and doing so eagerly.

His or her spouse recently lost a job and now being the sole breadwinner, they have to work extra hours. Employees like these are more prone to committing a crime than any other.

Engaging in conversation with them can help the employer analyze and understand what is going on in their minds. More often, the crime is committed by an employee from whom it is least expected. This brings us to the second precautionary step employers can take which is to implement controls and make sure that all employees are aware of them. Just the thought of being watched can prevent an employee from committing a fraud.

Documentation can also reduce the chances of fraud as it reports and records everything. The employer must ensure that they keeps a check on the documents and tallies them on a regular basis. A proper channel or SOP should be used by the employer which must be followed by all employees. These control programs must also be revised on a consistent basis.

Technological advancements are out there happening every single day. A professional must implement and assist in incorporating these programs in the company.

It all comes down to how the company handles and deals with the data in the company. Proper implementation and accountability can result in no frauds for the company.

1 Comment
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