Week 10 - Fraud & Prevention

Fraud is at present one of the most commonly perpetrated, but thoroughly undetected and unreported crimes in Australian business. A recent study by KPMG found that fraud losses over a two year period, in Australia, totalled up about $373million. This shows how widespread and damaging fraud is to Australian businesses, from large companies to small mum and dad retail businesses.

Fraud is broadly defined, but can be considered to be any intentional deception that is characterised by a false representation of a material point, which is then believed and acted upon by the victim, to their detriment.

A speaker at a business advisory conference recently outlined a set of the usual characteristics of a company that may lead to fraud. Some of these included low morale, high turnover of staff, management attitude, lowly skilled & trained staff (IT in particular), analytical anomalies, salary structures tied to profits and no education on how to report fraud. He emphasised the point that awareness and education is the key to defeating fraud.

If we analysed the above characteristics in regards to the fraud triangle, we would get the following diagram:

 

As you can see, while it is a bit light in the pressure section, the speaker has common characteristics leading to fraud. I would probably also include employee unwillingness to take holidays as an opportunity, and low employee satisfaction as a rationalisation, as common characteristics.

In regards to the point of awareness and education being key to defeating fraud, I would say in a broad sense, this is correct. Employees and employers both need to be aware of the prevalence of fraud, how fraud is commonly perpetrated, and how to combat fraud. The systems of stopping fraud, how to recognise fraud and the attitudes to convey for fraud are imperative for employers to learn and implement.

So, again, of course education and awareness is key to defeating fraud, or at least minimising it greatly, but there is a lot more to it than simple education.

 

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http://www.youtube.com/watch?v=Zdf_KrGQ6mQ – Great video directed to businesses to counter some common fraud incidences.

http://www.kpmg.com/AU/en/IssuesAndInsights/ArticlesPublications/Fraud-Survey/Pages/fraud-bribery-corruption-survey-2012.aspx -In depth KPMG survey into fraud