Hiring a new employee takes a lot of thought and effort, and for good reason. Your new employee may have access to sensitive company information or finances so it’s essential to quickly establish trust. In most cases, that trust results in a positive, productive working relationship. However, sometimes the worst can happen, and your business becomes a victim of occupational fraud.
Although it is unlikely, preparedness is one of the best ways to identify and prevent someone stealing from your company. Having solid accounting services can help protect you if you become the victim of occupational fraud.
What is Occupational Fraud?
The Association of Certified Fraud Examiners (ACFE) defines occupational fraud as “the use of a person’s occupation for self-enrichment through deliberate misappropriation and misuse of the employing organization’s asset and resources.” In other words, if an employee steals from their company, they are committing occupational fraud. While this can happen in a variety of ways, there are three common types of fraud to look out for.
- Asset misappropriation is the most common form of occupational fraud, occurring in about 89% of cases. This happens when employees steal equipment or cash, or present inflated expense reports and bills to pocket the excess.
- Corruption occurs when an employee uses their influence inappropriately for personal gain. It often takes the form of bribery or extortion and is most frequently undertaken by senior employees.
- Financial statement fraud happens rarely but is the costliest. Perpetrators inflate revenues and minimize losses to present an image of success to gain performance raises or new investors.
Who is at Risk for Occupational Fraud?
Any business can fall prey to occupational fraud, but those without strong accounting services and regular audits are particularly at risk. While it can happen anywhere, certain conditions make it more likely that occupational fraud will occur.
- Pressure either on the job or at home can contribute to an employee’s decision to commit fraud. If an employee feels pressure to perform or to make payments for a lifestyle beyond their means, it may drive them to commit fraud.
- Access to sensitive information and lack of accountability creates opportunity. If your business has lax accounting, then it becomes easier for an employee to take advantage.
- Frustration on the job can lead to an employee that rationalizes theft. Maybe the employee feels they deserve a raise, or they don’t agree with certain business practices and “compensate” themselves by stealing from the business.
How Can I Protect My Protect My Business from Occupational Fraud?
The best way to protect your business from occupational fraud is through a culture of accountability and reliable accounting services. Developing effective internal financial controls like accounting audits ensures you have the information you need to identify or even prevent fraud.
- Proper employee management goes a long way to preventing fraud. Creating a culture of transparency and accountability as well as ensuring that your employees are satisfied isn’t easy but often leads to greater trust and productivity.
- Clear boundaries and accountability are critical tools for safeguarding against fraud. Assigning clear ownership and oversight of financial tasks makes it difficult for fraud to happen and protects against event accidental missteps.
- Strong accounting services and regular audits give you a clear overview of your financial situation, making it easy to spot discrepancies and issues.
Contact Neely’s Accounting to Learn More
You don’t have to go it alone when it comes to developing a fraud protection plan. Since 2007, we’ve been helping Roanoke businesses stay financially healthy and secure. Contact us today to learn more about how we can provide accounting services that make sense for your business.