Many business owners are simply unaware of the fraud risks in their businesses, and therefore a significant amount of fraud can be undetected and unreported. Fraud is estimated at costing businesses in excess of 5.8 billion dollars annually.
The major types of fraud reported within a business include:
- Inappropriate use of corporate credit cards, or expense claims;
- Theft of cash;
- Theft of inventory or plant and equipment;
- Diversion of sales; and,
- False invoicing.
One of the most serious issues with fraud in business is that “red flags” are often ignored. Some key “red flags” include signs of excessive wealth and spending, aggressive management style, supplier favouritism, requesting pay advances, and business performance being inconsistent with key performance indicators. Nearly 50% of workplace fraud will be motivated by gambling, with the remaining motivators being greed, lifestyle and personal financial pressures.
Ways for a business to reduce their exposure to fraud includes conducting a fraud risk assessment, implementation of internal controls, use of internal and external auditors, data analysis and effective pre-employment screening.
If you do identify fraud in your organisation, some important tips are to:
- Discuss the details with your accountant, who can assist in referring the matter to the police;
- Do not write, mark, or handle documents that may be relevant to the investigation; and,
- Contact with the suspect should be minimised until you know what you are dealing with – interrogating the suspect yourself is not the best option.
If you would like to discuss risk of fraud to your business, please contact Mark Liesch or Ben Horner on 07 4632 1150.
