The risk of theft, fraud and even embezzlement has amplified in this era of globalization. In the contemporary scenario, various regulatory authorities, audit firms, large-scale organizations, and manufacturing firms emphasize the topics above. Multiple countermeasures are being taken by authorities to minimize the scope of theft by the employees. The process of IFRS (International Financial Reporting Standards) has been in the spotlight. It is easy to scope out any maligning activities at the time of reconciliation or internal audit. All the processes and procedures are now documented in the form of Standard Operating Procedures (SOPs) and Service Level Agreements (SLAs). With the advent of ERP (Enterprise Resource Planning), the entire mechanism and transitional procedures are also automated. This is particularly useful when it comes to highlighting any anomalies on a real-time basis.
In reputed firms, the human resource division has issued strict directives. If an employee receives a gift or a souvenir from the client, then a formal process must be initiated within the organization and appraise the relevant authorities. The human resource department, which has documented modus operandi for dealing with such circumstances, will then issue the course of action to the employee of what steps must be taken. Such instances or circumstances are already documented in the rulebook, which they call the “Code of Conduct.” At the time of hiring and after recruitment, the employee is given proper orientation on the “Code of Conduct” and the consequences in case of non-compliance.
The chances of embezzlement and theft are higher in small businesses. In other words, the process of decision-making is centralized. In this instance, the concept of maker and checker needs to be embedded in the firm so that two or more individuals monitor the process. There are two benefits from inoculating these processes; firstly, a succession plan is in place if a vital firm member resigns. Secondly, with dual or multiple monitoring mechanisms, the chances of theft reduce drastically. Management of financial information and inventory management are shared transparently, and each is tagged to certain accountability. Establishing the right set of protocols, corporate governance, internal audit, and compliance are all countermeasures to theft and embezzlement. Even sharing sensitive information with someone, who does not have the authority or is outside the scope of job function, can lead to severe ramifications.
Furthermore, abstaining from keeping a check and balance mechanism from peer workers is a deviation from accountability. Sharing information, such as account receivables, account payables, the disclosure of salary and financial information within an organization is an act of perjury. Therefore, utmost care must be taken to ensure that information and data leakage don’t lead to a significant loss.
The responsibility of bookkeeping should be shadowed by someone else in the accounts department as part of the reconciliation process. In doing so, the probability of modifying any transaction can easily be picked up and highlighted.
Any abrupt change or unjustified deviation in an employee’s behavior is a red flag that the organization needs to address. Even sudden changes to punctuality, regularity, or frequent vacation must be considered. It could be that the customer is obliging the employee (both financially and non-financially), and the employee is not conforming to the ethical consideration stipulated by the “Code of Conduct” as specified by the human resource division.
If the risk of theft and embezzlement is to be mitigated, all the processes should be documented, be it a small business or a large corporation. Proper record-keeping of the customers and employees is also vital. All the transactions taking place in a firm without a proper invoice, delivery, or payment order are also a violation. It tends to be reflected at the time of reconciliation. Even sharing sensitive keys and passwords is an open invitation to commit forgery and theft.
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