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Spot Workplace Fraud

Posted by: Today's Tip Contributor on July 14, 2010

Spotting occupational fraud can be difficult, but knowing what to watch for is the first step toward eliminating and preventing deceit in your business. According to the Association of Certified Fraud Examiners, the median loss to businesses is $175,000, but more than 25 percent of frauds result in losses of at least $1,000,000 and often continue for about two years before the fraud is detected. Below are five red flags to be aware of when watching for fraud.

1. An employee whose lifestyle does not match his or her income. This is the most common trait in employee fraud. The desire to support a lifestyle often leads to embezzlement and other crimes.

2. Managers or supervisors with dominant or controlling personalities who refuse to delegate work or take time off.

3. Employees who work excessively and refuse assistance. Although some may be viewed as diligent, hardworking employees, many fraud cases come from those who work long hours because they fear their scheme will be discovered in their absence.

4. Employees who go to extremes in their consideration for fellow co-workers.

5. Employees who work excessively and still produce poor accounting records.

While traditional check-tampering and disbursements frauds continue to be prevalent, there have been significant increases in other types of fraud involving corruption (kickbacks, bribes, and undisclosed conflicts of interest); hacking into networks and accessing sensitive data; and frauds perpetrated by agents and vendors as certain functions become increasingly outsourced, often without proper oversight.

Preventing and managing risk for fraudulent cases should be a component of any business. Studies have shown that implementation of anti-fraud controls has a meaningful impact on an organization’s exposure to fraud. From your employees’ first days on the job, your understanding of their likelihood of committing fraud should be enhanced by performing background checks, cross-training, and perhaps most important, fostering a culture of leadership that is based on honesty and loyalty.

Carl Jenkins
Managing Director
CBIZ Tofias

Reader Comments

Prof P.Madhu Sudana Rao,Ethiopia

July 16, 2010 11:08 PM

This fraud usually happens due to overconfidence on some employees and also due to exercise of little control over their activities.Some other factors which contribute to such frauds are
1) Having his own friends and relatives in the organisation,who cooperate each other.
2)Giving total freedom to the employee in matters of crucial and critical importance
3)When the entrepreneur does not understand the nature of work which the employee is doing and exclusively relies on him
4)When the employee is receiving lesser wages than the work he is doing and continuing to stay in the organisation without making any efforts to search better jobs
This is a very serious problem and needs to be controlled at the initial stages itself.The entrepreneur should be a jack of all and should check and counter check the work done by any body.

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