Every organization is a victim of employee fraud
Occupational fraud is common and pervasive, but it is often never reported to law enforcement. The aftermath of fraud can leave an organization reeling, regardless of size. Consequently, the extent of the damages can have a lasting impact and recovery can be difficult. The reality is that people are capable of wrong doing. Further, policies will be ignored, and controls don’t always function as intended.
Fraud Categories
There are three main categories of fraud committed against an organization. These are asset misappropriation, corruption, and financial statement fraud. Altogether, asset misappropriation is by far the largest and most common fraud type.
Asset Misappropriation
Asset misappropriation involves the theft, or misuse of company resources; these resources include time as well.
Theft of time is common and expensive. It takes years for organizations to find out an employee is stealing time. Employees steal time by adding hours to their time sheets, having others clock in for them, or through decreased productivity. However, stealing time through decreased productivity can be more difficult to measure and control.
Corruption
Corruption is the use of power or position for personal gain. It involves conflicts of interest, bribery, improper gratuities, and economic extortion. Cases of corruption is mostly seen in bid rigging and kickback cases.
Financial Statement Fraud
Financial statement fraud is the manipulation of financial data for greed or to make a company’s financial position appear better than it is. Consequently it could damage the organization’s reputation, along with investors and other stakeholders.
The overwhelming cost of employee fraud schemes
Despite the fraud type, or reason for fraudulent acts, organizations can take an offensive approach to reduce fraud risks and minimize losses. The organization stands to lose in many ways, from the fraud itself, having to hire an expert to investigate, and having to minimize or eliminate the opportunity that allowed the fraud to take place. Organizations also lose from having to go through the process of filling the position of the perpetrator.
Limit your organization’s fraud risks by keeping informed and using the right mechanisms.
