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A survey by KPMG has found 83% of companies have suffered incidents of fraud, with 75% of these frauds being carried out by employees.

42% had suffered theft of stock, 33% cheque forgery and counterfeiting, and 24% had been affected by kickbacks, bribes or secret commissions.

Assuming that these figures are typical, fraud is a threat to every business.

Who?
There will always be exceptions to a generalisation, but the factors which contribute to employee fraud are -

• financial pressure arising from loss or becoming accustomed to living beyond one's means
• the opportunity to defraud where controls are lacking
• rationalisation of the crime, i.e. the fraudster persuading himself he deserves it.

It is suggested that typically 25% of all employees will be honest in any event, 50% will be as honest as they have the chance to be, but 25% will be motivated to be dishonest.

Prevention
Consider the factors which contribute to fraud which include -

• lack of management concern
• poor risk assessment
• inadequate controls
• poor supervision
• poor training

Implement a good control environment which should include -

• division of duties
• authorisation procedures
• passwords
• reconciliations
• effective use of exception reports
• effective screening of employees

Consider checking all employees references and CVs before they start work - in some surveys up to 1 in 4 has been found to have an inaccuracy such as claiming a non-existent qualification. 

Reminder - disclaimer applies. Please feedback your comments.  This page was last modified 31 March 2002.