Occupational Fraud – What You Need to Know

occupational-fraudWhen we think of fraud, the first things that come to mind are often pyramid schemes, credit card scams, or the notorious email scams that have gained so much attention in the press over the past few years. What we don’t always think of is the fraud that could be going on in our own businesses – right under our noses.

Occupational fraud is one of the worst types of theft, mostly because it is committed by your own employees or business partners. Whether R100 is missing from petty cash or R100 000 is unaccounted for when your company’s annual audit is finalised, experiencing occupational fraud in your business can be extremely unpleasant. It may be equally difficult to catch and penalise the person responsible for this fraud unless you have certain safeguards in place.

How Occupational Fraud Occurs

Typically, occupational fraud occurs when an employee sees the opportunity to steal from your business without getting caught. This type of person, who has questionable morals and poor business ethics, may be a career fraudster or just a person who is desperate for money and can justify the fraud to themselves in some way.

Quite often, occupational fraud may arise from hard feelings the employee may have toward you after an argument or disciplinary action. Employees who handle cash are more likely to have the opportunity to commit fraud, and you should ensure that extra safeguards are in place if your business operates on a cash basis.

Preventing Occupational Fraud

Occupational fraud can be prevented by a good company policy on fraud that covers employee selection, auditing and financial tracking, and procedures for dealing with fraudulent employees. Here are some ways you can avoid occupational fraud in your business:

  • Choose your staff wisely – background checks and referrals are very important when you select new members of staff. Make sure you follow up with previous employers about the applicant’s trustworthiness before hiring.
  • Put checks in place – Ideally, the same person who handles payments shouldn’t keep the books in your business, and cash payments and receipts should be very carefully monitored. You should also rotate members of staff to ensure that the opportunity for fraud doesn’t arise.
  • Insist on an audit – Even though you may not need an audit for taxation purposes, an annual audit will reveal “leaks” in your business and should uncover any unusual transactions or movement of money that could indicate fraud. A good auditor will work with you to prevent occupational fraud in your business.

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