Corporate fraud is something that has impacted almost all of us at least once or twice in our businesses. But no one has even been able to get rid of it as its considered part of our business style these days. So what is corporate fraud exactly? Corporate Fraud can be any sort of fraud that is committed against a specific business. The usual cases of corporate fraud seen are very complex, highly private, and if discovered, can include financial scandals or evasions of economical responsibilities. There are a number of ways that corporate fraud can be committed; it can be in the form of theft of physical assets, confidential information or cash, misappropriate use of business accounts, procuring fraud, fraud of payroll, fabricated work credentials, extortion, credit and banking related frauds, specified insurance fraud and many more. These are just some of the many examples. With the passing of time, the list seems to become longer and longer.
Types of organizations affected by Corporate Fraud
Now the question at hand is how can we actually measure the extent of corporate fraud and what steps can we take to eradicate this obnoxious scam from our organizations? Everyone is eventually facing this rip-off and it really doesn’t depend on the organization’s size, industry, net worth, or location. Fraud does not discriminate. You cannot easily plan to squelch white-collar crime without discouraging healthy business growth that benefits the consumer. However, there are chances that the odds will move against you if you adopt a prudent entrepreneurial approach. The government vigorously tries to avoid fraud with different policies, rules, and techniques designed to help law enforcement detect schemes before they blow up.
According to recent studies by the American Institute of Certified Public Accountants (AICPA), small businesses are usually targets of fraud. Small and midsize companies undergo a greater part of fraud damages than do larger companies. And, the reason is quite obvious because small companies don’t have the resources to implement proper fraud prevention protocol and, even if it is implemented, the protocol is not often taken seriously or followed by the company’s employees.
Fraud Prevention Program
Specialists estimate that businesses lose 5-6% of their yearly profits due to white-collar fraud. A complete fraud prevention program is definitely required if you do not want to become a part of these statistics. This consists of three things:
- Preemptive prevention
It is the responsibility of the stake owners to give each and every employee a complete training on how to identify the signs and symptoms of a fake business con and how to report these scams efficiently. Even if the fraud has been identified by someone in the business, they often hesitate to come forward because it may be hard for that individual to explain the situation and they fear of losing their position in the company based on what they have found. The most important thing for a company owner to tell all employees is that they have their complete trust, rely on their actions, and that they should come forward without any hesitation in case they find something. Whether it is a small or large organization, employees are most likely to report suspicious activity when they have the essential knowledge to help the company as an integral part of the fraud prevention program. Almost 90% of the time, corporate frauds are committed within the organization so, while fraud avoidance efforts are designed to stop employee fraud, inspections of suspected fraud should discourage other employees from committing fraud.
Secondly, once the fraud has been identified, proper and through interrogation and investigation is a must. Identifying and inspecting signs of fraudulent doings should never be overvalued or taken too superficially. All employers must remember the influence on the company reputation and internal atmosphere of setting the wrong person under exploration.
Thirdly, and the most important factor in fraud prevention program, is to carry out certain prevention measures to see the general picture and know the background of fraud, categories of fraud, and detection techniques applicable to fraud in corporate setting. Decide what action should be penalized to the culprit or guilty party based on the results of the investigation. There should be a structured report according to the elements of proof for the relevant offenses. The action taken will certainly set an example in front of everyone in case of any future corporate mishaps.
The one sure thing for almost all business owners to know is that we can never completely eradicate fraud in our businesses, but we can definitely take preventive measures and be more efficient with keeping a strict eye on all things related to corporate fraud by properly educating everyone working in the corporation.
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