Fraud – Are You Protected?
In our line of work, we hear it all the time: “I never thought it would happen to me/us!”.
The reality is that fraud, whether occupational (committed by someone inside the organization) or external, is as much of a threat to organizations as it ever was. What you should be asking is “could it happen to me/us?”, and if the answer is yes, take appropriate steps.
Here are some statistics* you may want to consider:
- Small businesses lost almost as much per scheme to fraud as larger businesses ($200,000 median loss for organizations w/ less than 100 employees vs. $104,000 median loss for organizations w/ over 100 employees).
- Internal control weaknesses were responsible for nearly 50% of frauds
- Fraud isn’t always what you think – most people associate fraud with a person skimming from a register, but this only accounts for about 13% of cases in Canada. The most common is corruption (the use of a position of power for illicit personal gain) at 40%, followed by billing fraud at 20%, non-cash fraud at 18%, and financial statement fraud at 14%.
- A majority of the victimized organizations (53%) recovered nothing like the final outcome.
Measures as simple as a formal Code of Conduct can reduce fraud occurrence in an organization by as much as 56%. Having a robust system of internal control you can rely on is key to preventing or detecting fraud.
Here are some suggestions when developing your organization’s internal control system:
- Segregation of duties relating to cash or assets,
- Timely and/or surprise review of financial records and documents,
- Ensuring employees understand the implications of being caught perpetrating fraud,
- Periodic review of purchasing & sale processes to ensure no fraud opportunities exist for employees, especially when there is a change in procedures.
These are just some of the possibilities for implementation, and each organization should customize its fraud prevention and detection system for its particular business. If you would like our help designing measures to prevent fraud or to review what you’ve got in place now, let us know!
* All statistics come from the Association of Certified Fraud Examiners’ 2018 Report to the Nations on Occupational Fraud and Abuse