According to the ACFE (Association of Fraud Examiners), fraud amounts to an estimated 660 billion dollar loss every year. An Earnest and Young study of leading companies in 32 countries has found that more than 50% of companies have been victim of fraud - 84% of those losses are attributed to staff and 50% of the most serious fraud is committed by company management.
The Fraud Pyramid consists of three factors:
- Motive - usually the need of money to pay bills, support lavish lifestyle or addictions
- Opportunity - lack of internal controls within a company generally provides opportunity for fraud
- Rationalization - ability to justify committing fraudulent activity
How to Mitigate Fraudulent Activity:
- Have written policies and procedures
- Establish internal controls, i.e., separation of duties
- Keep supporting records of all purchasing, receiving and warehousing transactions
- Reconcile bank accounts monthly
- Adequate screening of new employees
- Employee rotation and mandatory vacations
If you suspect fraudulent activity within your organization you should consider contacting a forensic accountant - they have specialized skill-set in applying accounting, auditing and investigative tactics to uncover truth, form legal opinion and assist in criminal investigations.