"I don't have a problem. There's no fraud in my business!"
Chances are, you're wrong. According to The Economist, over 85% of companies are already victims of fraud – and that’s just where fraud has been detected! And if you’re a smaller business, it’s even worse. Your financial controls are probably not as good as they should be, and so you’re even more likely to be a victim of fraud. |
There are 3 types of employees in every business: 1) The honest ones 2) The dishonest ones, who are already committing fraud – or will definitely do so at some point in the future 3) The mostly honest ones who will yield to the temptation to commit fraud if the opportunity presents itself - especially when times are tough Can you really say that all your employees are honest? Not very likely. |
"OK, so fraud is happening in my company. How much is it costing me?"
According to the Association of Certified Fraud Examiners, companies lose on average 7% of turnover to fraud. That's a serious amount of money you're throwing away. And in tough economic times, it's even worse. The problem is that the prevalence of fraud - and the amounts involved - are increasing at an alarming rate. |
"Do I need to do anything about it?"
Yes, absolutely! Can you really afford to continue losing huge amounts of cash every year? There are also non-financial effects resulting from fraud - such as the negative impact on the company's reputation, bad publicity and the damaging effect on employee morale. And on top of that, you are probably legally required to do something about it. In most countries, legislation and corporate governance rules require you to have an anti-fraud reporting mechanism in place. This is covered in International Auditing Standard 240, the King II corporate governance codes, the Companies Act, Sarbanes-Oxley, and so on, depending on where your business is based. |
"What type of fraud are we talking about?"
Broadly speaking, fraud involves any illegal activity which results in a loss for the business. This typically includes: