It is no secret that fraud prevention, online privacy, and cybersecurity are complicated and constant concerns in today’s world. Fraud threatens companies and organizations, and individual consumers as they go about their daily business – both online and off. Employee fraud is a significant problem faced by establishments of all types, sizes, locations, and industries. While we would all like to believe our employees are loyal and working for the benefit of the organization (and most of them probably are), there are still many reasons why your employees may commit fraud and several ways in which they might do it.
According to the 2014 Report to the Nation on Occupational Fraud and Abuse (copyright 2014 by the Association of Certified Fraud Examiners, Inc.), research shows that the typical organization loses 5% of its annual revenue each year due to employee fraud. Prevention and detection are crucial to reducing this loss. Every organization should have a plan in place, as preventing fraud is much easier than recovering your losses after a fraud has been committed. We aim to show why traditional in-house controls can be ineffective in averting many frauds and how to combat fraud more effectively and economically. The most important thing to do is discover what steps can be adopted by individuals to protect their organizations from fraud.
Measures for Fraud Prevention
Prevention of fraud nowadays is not just a good business practice but should be a requirement. Most corporations face several risks, each of which is huge and potentially destructive. The issue of vicarious liability stands out among these risks. Illegal acts committed because of organizational policy have held corporate and other entities liable for such acts. Employee criminal acts which are devoted in the course and scope of their employment for the benefit of the business entity also make the company liable. Sometimes a worker can perform an unauthorized act on behalf of the organization, which holds the association liable. A business can institute an intimidating fraud prevention program through financial risks from fraud losses, shareholders’ lawsuits, prosecution, fines, and convictions for fraud. The emotional toll of fraud and reputational risk should be taken into attention. The impression on the personnel and families who have nothing to do with the company’s fraudulent activities set the emotional toll since they suffer the penalties.
Based on other deliberations on why people commit fraud, an organization must adopt effective ways of dealing with fraud, which will reduce stimuli, opportunity restriction and lowers the potential ability of the perpetrators to rationalize their actions.
Prevention of fraud needs a system of strategies and procedures that could reduce the likelihood of fraudulent activities. The chance of being caught typically convinces the potential fraudsters not to commit fraud. As a result of this principle, the requirements of a systematic and detailed control system are necessary to any fraud program. An operational fraud program establishes the critical features of “potential of being caught” and “the existence of a thorough control system.” It is similarly imperative to be proactive rather than reactive. Four main components form an effective anti-fraud strategy:
The features of an effective and rigorous anti-fraud strategy are meticulously related, and each plays a vital role in combating fraud. Fraud detection can act as a preventive by spreading a message to potential fraudsters that the company is fighting fraud and that necessary procedures are placed to pick any unlawful activity which could happen. A potential fraudster would discontinue committing the crime if there is a possibility of being caught. Sometimes prevention controls would be approved by detection controls if they are insufficient. Doubted and identified fraud incidents need a reliable and comprehensive response. This will spread a message across the board that fraud is a dangerous issue and that subsequent action would be taken against the culprit.
Removal of fraud temptation and opportunity reduction is the aim in the case of deliberately committed fraud. Fraud prevention and loss prevention are profitable and can help to ensure constancy and going apprehension. Unfortunately, it seems many companies do not have a formal fraud prevention approach. Once fraud has occurred, it is not easy to recover such losses; as such, it is quite advisable to prevent such losses from occurring, and the old saying “prevention is better than cure.”About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.