Employers are often unsure what to do in the event that they discover an employee fraud. These can range from payroll fraud to false accounting and expense claims and they can have a devastating impact on the employer’s financial stability, reputation and the morale of other employees. It is therefore important that businesses take precautionary measures rather than waiting until a fraud is uncovered. A plan of action to tackle employee fraud should be in place to reduce the impact of such frauds on the business and to maximise the chances of recovering any losses.
There are several components which create the perfect ‘fraud storm’. Firstly, the employee in question is usually subject to pressure or motivation. This could be economical in the form of debts or excessive spending and will usually be kept secret from colleagues or family members. Secondly, the opportunity to commit the fraud either presents itself or can be exploited. Unscrupulous employees will look to commit frauds in departments where there are lax internal controls or an apparent lack of internal reporting structures. Employee fraud also tends to occur where the employee has wide discretion and minimal oversight. Finally, the employee will seek to rationalise their wrongdoing. For example, this could be in response to the employee feeling aggrieved after being overlooked for promotion or where their bonus was less than expected.
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