Do you know that:

men committed nearly three quarters of fraud offences? losses caused by managers were 4 times those caused by employees? losses caused by executives were 16 times those of their employees? asset misappropriation accounted for more than four out of five offences? fraud occurring in organisations with less than 100 employees was generally more significant than in larger organisations? These are the findings of a report on fraud in the USA, which also found that fraud in the USA, costs US organisations more than US$400 billion annually. Fraud affects all industries and businesses and involves the intentional misrepresentation and deception for personal gain. Crimes which have been conveniently lumped into the classification of fraud include:
Embezzlement or pilferage Bribery or kickbacks Ghost employees Phony loans or suppliers Fictitious purchases or expenses False or inflated claims Insider dealings Insurance frauds Preferential business dealings and loans to friends, relatives, etc. Theft of data Unrecorded sales Unauthorised use of confidential corporate information

If you think fraud is a one-time act, think again. Many frauds go undiscovered for years, and increase to enormous proportions. Another common myth is that internal and external audits will detect and prevent frauds. A study found that only in one third of the cases did internal and external audits uncover fraud.

If you think fraud is a one-time act, think again. Many frauds go undiscovered for years, and increase to enormous proportions. Another common myth is that internal and external audits will detect and prevent frauds. A study found that only in one third of the cases did internal and external audits uncover fraud.

Warning signs
There are however warning signs that you can look out for. These phenomena, which could be indicative of potential frauds, can either occur on its own or in combination:

• Low bidders are bypassed on technical grounds
• Low bidders are bypassed on technical grounds
• Complaints by outsiders are not investigated
• Quality standards are not being met in a manufacturing environment
• Frequent use of one or two suppliers
• Reputable suppliers shy away from submitting bids
• Frequent entertainment of employees by vendors
• Costs of materials/services are out of line with market
• Costs standards are not realistic and the resultant variances are excessive
• Employees' reluctance or refusal to go on leave
• Deficiencies in inventory and account receivables management come to light
• Altered or destroyed records
• Suspect is "touchy" when questioned

Conditions for fraud
Opportunity is the most controllable condition for fraud. Frauds are more likely to be committed where controls are weak rather than absent. The most common weaknesses that give rise to opportunities for fraud are:

Fraud thrives in organisations that have little respect for controls. Organisations where the top sets a poor ethical tone tend to have more problems with fraudulent acts by their employees too.

Prevention
Conscious efforts must be made towards the deterrence and detection of fraud. Very often, the possibility of being found out acts as a deterrent to some who might otherwise commit frauds. The following lists some methods that you can employ to deter fraud:

-

Separation of duties;

-

Implementation of appropriate audit controls

-

Keeping of proper records

-

Having spot checks and unannounced audits

-

Commitment to security and the implementation of security measures and follow up