The Top Five Areas to Monitor for Employee Fraud

Employee Fraud Stopped - Complete Controller

The Association of Certified Fraud Examiners (ACFE) ‘report to the nations on occupational fraud and abuse’ published its global fraud study in 2016.

According to the Executive Summary by ACFE Global Fraud Study in 2016, a typical organization loses 5% of revenues each year due to fraud. Corporations of different sizes incline to have various fraud risks. In big corporations, corruption was predominant, while check tampering, payrolls, and stealing were twice more common in small businesses. Exit Advisor

Frauds are often more common in small businesses as they lack special security checkups and foolproof systems. A small business may have installed accounting software, but small businesses may lack many functions reserved for software purchased by big corporations. Even though you may have bought good accounting software for a small-sized firm, there remains a chance of fraud. Usually, a single person is trusted to operate the accounting software and business bookkeeping in a smaller company.

Focus on these areas in a small business to minimize small business frauds:

  • Expense
  • Procurements
  • Payments

Top areas to monitor for employee fraud

Frauds come through these channels:

  1. Frauds through Purchase Order
  2. Misuse of Business’ Credit Cards
  3. Frauds on sales and receivables
  4. Payroll Frauds
  5. Information systems and critical data stealing

Frauds through purchase order

  • Employee purchases goods that he intends for personal and private use. LasPass – Family or Org Password Vault
  • The employee makes a vendor’s account in which he pays fraudulent invoices.

You can trace frauds through purchase orders by checking if the same person makes purchase orders and approves payments for those orders. It can also be detected if various split purchase orders are within an allowed limit.

Misuse of business credit cards

  • Many businesses give corporate’s credit cards to their employees when they are going on a business trip. When the credit card bill arrives, do not blindly sign the account. Before signing, check the outlets where you had used this card. You should not use your business money for any unapproved items or excursions.
  • Many frauds fall into a double billing fraud type. An employee uses the business credit card to make an expense. Then he again submits the receipt for the same payment to reimburse the money. There should be a strict procedure to keep a check and balance on double billing frauds.

Frauds on sales and receivables

The employee develops a personal contact with the sales representative and gets a commission on that.

Fraud tests can spot customer accounts receiving unusual discounts, customer reports having higher memos, customer accounts with high credit terms, and when the shipment address of sales is the same as employees. ADP. Payroll – HR – Benefits

Payroll frauds

Payroll frauds can be of the following types:

  • The payroll of a person who was terminated or died still exists in the payroll section
  • The payroll of a person who does not exist at all
  • Adding overtime payments to the payroll without permission or reason

Information systems and critical data stealing

Employees can steal and misuse critical data from a company’s information system. They can sell the customers’ data and information related to address and contact numbers to a third party.

To check for any data stealing from your business database, run specific tests on the computer system. The test will detect the accounts that had accessed the database from their company’s accounts. Check out if this employee had the authority and permission to log in to the company’s database.

If an authorized employee makes frequent logins to the system and there is no such apparent need, monitor closely. Run tests to access if any data was copied and moved.

A unique software runs discretely to detect emails carrying critical and essential data of the company.


No business is immune to fraud or theft. Employers should closely monitor the activities of their employees. They should focus on the above five areas that act as a channel of employee fraud. Employers must strictly observe the bookkeeping, mainly to prevent fraudulent activity.

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