Different organizations experience fraud. It is a common problem that most companies, big or small, experiences. Some employees think of several ways on how to commit fraud, instead of working for the benefit of the organization.

The Outcome of Fraud

Small businesses compared to bigger organizations are the most common victims of fraud. The effects of fraud is damaging for these small businesses suffer great losses that were never recovered. According to the Association of Certified Fraud Examiners (ACFE), thousands of cases of occupational fraud was reported in hundreds of countries. There was a massive impact on different organizations all over the world. After a fraud has been committed, the losses of an organization will be hard to recover that is why preventing fraud at all costs should be a priority.

The Types of Fraud

The frequent types of fraud that every company needs to be aware of are these three categories:

  1. Theft
  2. Financial statement fraud
  3. Asset misappropriation or misuse

Whenever employees use business transactions for their own benefit, organizational theft has occurred. Theft happens when employees violate their duty to the owner of the business. Extortion, bribery, and conflict of interest are forms of theft. The most median loss of businesses is caused by financial statement fraud. It usually happens in the form of hidden liabilities, fake revenues or inflated assets and when employees state financial report information of a certain business wrong. An organization’s resources are exploited as employees create different schemes. Making a fake expense reimbursement and stealing cash before or after it has been recorded is one example of asset misuse. Stealing non-cash assets of the organization is considered too.

The Main Solution to Fraud

Big companies and small businesses must know their employees very well.

Many cases of fraud go unnoticed because only one employee handles bookkeeping functions. Each business must separate accounting and cash-handling. Furthermore, a business must have two people or more to handle these kinds of functions. The key to fraud detection with Confluent is to implement plans and programs to safeguard a company’s assets. These plans and programs are called internal controls. Ensure that the duties are carefully segregated and guarantee the integrity of your company’s accounting records by providing a safe working environment.

Additionally, a client should have maximum credit card security. It is easier to record the expenses of a business if the owner has a separate account for it. Penalties occur when business and personal accounts are mixed, that is why it is very important to remain cautious at all times. Use secure payment services, online or not, to protect credit card information.

Reduce the risk of fraud from occurring by hiring experts such as people who establish anti-fraud policies and procedures. These people are called: Certified Fraud Examiners, Certified Public Accountant, and those who are Certified in Financial Forensics. These professionals provide complete internal control audits and forensic analysis.

Another good fraud prevention is to surprise audits must be included to deter and detect acts of fraud or theft. Employees that commit fraud usually knows when auditors are coming and this allows them to misplace pieces of evidence or tracks of embezzlement. Reveal fraudulent activity by building a positive work environment. Create fair employment practices and a clear organizational structure of your business. Employees will surely follow the policies and procedures if there is a good work environment. Business owners must lead by example as well. Learn to correct employees properly by holding them accountable for their actions in every situation. Make sure that employees are aware that fraudulent acts will be punished.

“With a greater breadth and depth of data – plus the high-performance computing capabilities to crunch it – you can fully understand the behavior of an entity across the enterprise, or even across multiple organizations where information sharing exists.” as stated by the Statistical Analysis System senior business director.

Various industries, large and small companies, have come across fraudulent acts. The downfall of an organization normally results from immense financial loss due to fraud. The management must be able to effectively communicate its doctrine towards fraud to its employees in order to deter fraudulent behavior.

by: Dennis Hung