Ways to Help Prevent Corporate Fraud

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Executives have the means to commit and cover up the largest frauds. They have access to the information and computer systems, they have power over all employees and they have access to the money. The finance function is riddled with fraud risks and the company’s executives are in the best position to take advantage of those risks.

Because of the risk of losing large sums of money to fraud by executives, companies must ensure owners and boards of directors are actively involved in creating and maintaining an environment that is not conducive to fraud. This involves active oversight of daily operations, continuous monitoring of potential red flags of fraud and swift action when fraud is discovered. Continue reading

An Ounce of Prevention

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If you haven’t heard by now, internal fraud is expensive, costing companies an average of 6 percent of revenues each year. Employees are in an excellent position to steal the company blind. Particularly for those in upper management, access to assets is easy to come by.

With an estimated $3.7 trillion stolen annually by employees around the globe, companies should be highly motivated to invest in fraud prevention. Creating and implementing effective policies and procedures is not cheap, but it is far less expensive than exposure to internal fraud.

Companies should develop a comprehensive fraud prevention program that impacts all areas of a company. Such a program has three critical parts: education, investigation and proactive prevention. Continue reading

Fostering a Culture of Integrity in Your Business

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The average business loses approximately 5% of revenues to employee fraud. The employees are running off with money, fixed assets, and business opportunities. They are taking kickbacks from suppliers who overcharge for their products and services, and pushing contracts toward friends and relatives. Executives are manipulating financial statements to increase stock prices and impress lending institutions.

These types of dishonest activities can be decreased, however, by companies that take action to prevent and discourage fraudulent behavior. An extensive fraud prevention program might be the most effective way to reduce fraud opportunities, but following a recent flurry of regulatory requirements, many companies aren’t willing to invest more in revamping policies and procedures.

Activities that were traditionally thought to deter and detect fraud, such as independent audits and internal examinations, have been found to be less effective than previously believed. Those types of procedures may still provide some valuable business benefits, but they should not be relied upon as a primary tool for detecting and preventing fraud. Continue reading

Expense Report Abuse: Much Ado About Nothing?

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The dreaded expense reports. Employees hate preparing them. Companies hate reviewing them. They seem to be painful for everyone involved, yet companies can’t get away from them all together.

You’re asking yourself why this might be an important topic. Expense report losses are really a minor expense for most companies, aren’t they? Yes, they are.

However, the problem with them is what they stand for in other areas of the company.

Cheating on expense reports is one of the most common thefts perpetrated by employees. While the amounts lost to expense report abuse may be small, condoning this unethical behavior can lead to bigger problems. Continue reading

When Employees Steal: Five Reasons Your Business Could Be Vulnerable to Fraud

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The last thing you want to discover is that one of your employees is stealing from your small business. Not only is it a total violation of your trust, but internal fraud also has the potential to put you out of business.

According to the Association of Certified Fraud Examiners, businesses lose an average of 5% of revenues each year to fraud. Could your company survive if an employee stole 5% of your revenues? Continue reading

Recognizing the Red Flags of Fraud

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People who steal from their employers often exhibit telltale characteristics that could tip off management that they’re likely to commit fraud. These characteristics include attitudes on the job, daily work habits, and personal lifestyle issues. A few of these traits alone do not indicate fraud, but the potential for fraud to occur rises with more of the characteristics in an employee.

Often when a victim of occupational fraud reflects on the work history and personal life of the perpetrator, a light bulb comes on. The perpetrator exhibited many of these characteristics, but those things were overlooked in the normal course of business. Awareness of these characteristics can help reduce internal fraud. Continue reading

How to Catch Employees Stealing

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top-secret-confidentialHave you ever wondered how and when your employees are stealing from the company? Did you ever wish that you were a fly on the wall, hearing all of the conversations that led up to a group theft? Have you considered secret cameras throughout your workplace to catch employees in the act? Have you wondered what employees are discussing with one another via your internal messaging system? Are you curious about how often employees are surfing the Internet?

It’s no secret that employees routinely steal from their employers. Whether it’s the office supplies taken home for the kids, the extra break while still on the clock, or stealing customer payments, they all constitute theft. Possibly even worse may be the instances of employee disloyalty, such as badmouthing the boss or encouraging good employees to leave the company. Continue reading

Finding a Thief: Personal Red Flags of Fraud

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As victims of occupational fraud reflect on crimes committed against their companies, they wonder if there were any signs that a fraud was occurring. They wonder how a trusted employee could steal from the company. Sadly, frauds are committed by people in positions of trust. What is it about those people that leads them to commit fraud?

Corporate thieves have many things in common with one another. There are many tell-tale characteristics about people and their lifestyles that signal the potential for fraud. These range from personal financial circumstances to attitudes on the job. A few of these traits alone do not indicate the potential for fraud, but the probability rises as we identify more of the characteristics.  Continue reading

The Fight Against Fraud: Arm Yourself With Prevention

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Fraud is big business. Companies are at the greatest risk of fraud from their employees, since the employees have easy access to information and assets. Some experts estimate that companies lose 5% of their revenues to internal fraud. At a company with annual sales of $100 million, that means that $5 million is walking out the door each year.

Executives tell themselves that their company isn’t the norm. They do better than average. They certainly haven’t been a victim of internal fraud to the tune of 5% of revenues. The sad truth is that they don’t know exactly how much has been stolen from their companies because they aren’t aware of all the fraudulent activities committed. Five percent is an average level of fraud for a company, and it would be wise for executives to take this number seriously. Continue reading

The Fraud Blame Game: Accusing the Auditors

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magnifyprintWhen a company discovers an internal fraud, it’s not uncommon for owners and management to look for a party to blame. After all, someone should have known that a fraud was in-progress, right? Often, the blame is cast in the direction of the auditors.

The auditors are an easy target. Not only do they usually have professional liability insurance policies to fall back on, the auditors initially seem like the logical culprit.

Management often believes that the auditors worked very closely with the financial information; therefore, they should have discovered the fraud. Continue reading