How
To Prevent Fraud Losses
According to the Association of Fraud
Examiners 62% of respondents to a survey reported losses due
to employee fraud in the past year. The organization estimates
the employee fraud costs $400 billion annually, and, unfortunately,
the use of electronic accounting systems often aids the perpetrators.
In order of magnitude, the fraud activity consists of the
following:
- Medical/insurance claims fraud
- False financial data
- Credit card fraud
- Check fraud
- Inventory theft
- Bid rigging and price fixing
- False invoices and use of fictitious
vendors.
- Expense account abuse
- Purchases for personal use
- Kickbacks
- Payroll fraud
The fraudulent activity usually is
the result of financial pressure on the employee that stems
from such factors as: maintaining a higher than affordable
lifestyle; creation of excessive personal debt through gambling,
substance abuse or other factors; incurrence of business or
investment losses; real or imagined resentment against the
firm or its management, or simply dishonesty on the part of
the employee. In most instances, the fraud would have been
preventable through the use of adequate internal controls,
but their absence provides the opportunity to commit the theft.
In order to protect themselves against internal fraud, many
clients ask us to perform internal control reviews on a regular
basis. Often, the performance of regular independent audits
on an annual and more frequent basis may also act as a fraud
deterrent. Finally, if fraud is suspected, we are often asked
to conduct investigations designed to determine its existence
and magnitude. We'd be pleased to discuss this subject in
greater detail with interested readers.
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