Two Employee Fraud Schemes To Consistently Monitor
Even in a generally well-run organization, fraud still takes place. Organizations put departmental controls in place to protect various aspects of its operations. Often, these controls function as intended. However, if the controls are circumvented or overridden by management, they become ineffective and are susceptible to further manipulation by others.
In ACFE’s report to the nation 2020, collectively more than half of occupational fraud schemes are committed in operations, accounting, executive and upper management, and sales. Lasting an average of 13 months before being detected.
It is important that organizations monitor and continuously enhance their fraud risk management plan. This plan should be ever evolving and updated real time.
Why continuous fraud monitoring activities are important
Fraud monitoring is the core of any typical fraud prevention strategy. Continuous fraud monitoring is the process of constantly monitoring all actions against controls to ensure no fraud is occurring or can occur. These monitoring activities allow for controls to be adjusted where necessary. The longer fraud schemes go undetected, the greater financial harm they cause. If fraud is uncovered early, chances of recovery is more likely.
Two common fraud schemes that organizations should monitor
As we all know, fraudsters love cash. Cash is the most common asset stolen by dishonest employees. Theft of cash can happen in many ways, but we will focus on two of them, skimming and larceny.
Skimming
Skimming involves the theft of cash before it is recorded the organization’s accounting records. It can happen at any point where cash enters a business. Thus, employees that receive and process cash presents a bigger risk. Some skimming methods include off site sales, after hours sales, no ring sale, or issuing false receipts.
Organizations can reduce risk of theft by skimming through random spot checks, and encouraging customers to request receipts.
Larceny
Larceny is the theft of cash after it has been recorded in the organization’s accounting records. Cash larceny can be perpetrated by anyone who has access to cash, from the accountant down to the cashier. Employees can steal cash by taking it from the register, from petty cash, or from the bank deposit. With this method of theft, perpetrators make every effort to conceal their actions through falsifying records or creating false documents.
As best practices, organizations should ensure proper reconciliations, separation of duties, and random checks. No matter the fraud type, organizations should endeavor to lower their risk of fraud.
