Corporate fraud is something that has affected almost every business at one time or another. It is a sad price of doing business. Corporate fraud can be any fraud that is committed against a specific company. Corporate fraud cases are complex, private, and can include financial scandals or evasions of fiscal responsibilities. It can also come as theft of physical assets, confidential information, or cash. Also, misappropriate use of business accounts, fraud of payroll, extortion, credit and banking-related frauds, specified insurance fraud, and much more.
Types of Organizations Affected by Corporate Fraud
Now, the question is how can we measure the extent of corporate fraud and what steps can we take to eradicate this obnoxious scam from our organizations? Everyone faces this issue, and it doesn’t depend on the organization’s size, industry, net worth, or location. Fraud does not discriminate. You cannot plan to squelch white-collar crime without discouraging healthy business growth that benefits the consumer. The government vigorously tries to avoid fraud with different policies, rules, and techniques designed to help law enforcement detect schemes before they blow up.
According to recent studies by the American Institute of Certified Public Accountants (AICPA), small businesses are greater targets of fraud. Small and midsize companies undergo a more significant part of fraud damages than do larger companies. The reason is apparent: small companies don’t have the resources to implement proper fraud prevention protocols. Also, even if implemented, the protocol is often taken lightly by company employees.
Fraud Prevention Program
Specialists estimate that businesses lose 5-6% of their yearly profits due to white-collar fraud. A complete fraud prevention program is required if you do not want to become a part of these statistics. This consists of three things:
- Training/education
- Exploration/investigation
- Preemptive prevention
Training/Education
It is the responsibility of the stakeholders to give every employee complete training on identifying the signs and symptoms of a fake business con and how to report these scams efficiently. Even if someone in the business has recognized the fraud, they often hesitate to come forward because it may be hard for that individual to explain the situation, and they fear losing their position in the company based on what they have found. The most important thing for a company owner to tell all employees is that they have their complete trust, rely on their actions, and that they should come forward without any hesitation in case they find something. Whether it is a small or large organization, employees are most likely to report suspicious activity when they have the essential knowledge to help the company as an integral part of the fraud prevention program. Almost 90% of the time, corporate frauds are committed within the organization, so while fraud avoidance efforts are designed to stop employee fraud, inspections of suspected fraud should discourage other employees from committing fraud.
Exploration/Investigation
Secondly, once the fraud has been identified, proper and thorough interrogation and an investigation is a must. Identifying and inspecting signs of fraudulent doings should never be overvalued or taken too superficially. All employers must remember the influence on the company’s reputation and internal atmosphere of setting the wrong person under exploration.
Preemptive Prevention
Thirdly, and the most critical factor in a fraud prevention program, is to carry out specific preventative measures to see the general picture and know the background of fraud, categories of fraud, and detection techniques applicable to fraud in a corporate setting. Decide what action should be penalized to the culprit or guilty party based on the investigation results. There should be a structured report according to the elements of proof for the relevant offenses. The action taken will undoubtedly set an example in front of everyone in case of any future corporate mishaps.
Final Note
The one sure thing for almost all business owners to know is that we can never completely eradicate fraud in our businesses. Still, we can take preventive measures and be more efficient with keeping a strict eye on all things related to corporate fraud by properly educating everyone working in the corporation.
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