What Is Company Fraud And How Do You Stop It? (Part 1 Of 2)
Did you know that it is very likely your company is a victim of fraud? In fact, it's probably happening right now! Fraud takes many forms - some obvious and well known, others subtle and unmarked. This two-part article sheds some light on the topic. Part 1 helps you determine whether your company is vulnerable to (or, indeed, already a victim of) fraud. It discusses fraud in further detail and provides definitions and real-life fraud examples. Part 2 goes on to explain how you can minimize fraud in YOUR company.
What is Fraud?
Companies around the world lose a staggering amount of money to fraud and abuse. According to government and private studies, the following example is typical. A manufacturing company earns $60 million in revenue and $18 million profit per year. Fraud and abuse cost approximately 6% of revenue ($3.6 million). The company's profit margin on revenue is 30%, therefore they need to generate an additional $12 million in revenue (20% additional revenue) just to cover the cost of fraud and abuse. (Source PWC.)
The enactment of the United States Sarbannes Oxley Act of 2002 was a direct result of numerous well-publicized accounting scandals (some may say "frauds") involving high-profile companies. The intent of the Act was to not only close the loopholes that made these transgressions possible, but to also hold companies accountable for those transgressions.
But what exactly is fraud?
The broadest definition of fraud (as per the Merriam-Webster's Dictionary of Law, Copyright 1996 Merriam-Webster, Inc) is:
"any act, expression, omission, or concealment calculated to deceive another to his or her disadvantage; specifically : a misrepresentation or concealment with reference to some fact material to a transaction that is made with knowledge of its falsity or in reckless disregard of its truth or falsity and with the intent to deceive another and that is reasonably relied on by the other who is injured thereby"
Some Examples of Fraud
By this definition, fraud encompasses such things as negligence in ensuring business expenses are actually incurred, reported on time, or at the accurate dollar amount. It also encompasses reckless disregard in separating personal expenses from business expenses and consistent failure to use due care and follow policies.
Four of the more common forms of fraud and abuse relate to:
1) Travel and entertainment expenses
2) Unauthorized use of corporate credit and purchasing cards
3) Related party transactions
4) Receipt of free or below market-cost goods and services from vendors, suppliers, etc.
And it can be very difficult to actually pinpoint the precise point at which the fraud occurred. Corporate fraud is found in many forms which are not particularly obvious at first glance. For example, companies spend millions on accounting packages, CRM, ERP, and database solutions that have the highest grade of security and data integrity to manage their businesses. Unfortunately, in the majority of cases, this data ends up in spreadsheets where the data integrity is very easily lost. This final stage of the information journey is known as THE FRAGILE LAST MILE. During the fragile last mile, there are typically no controls or standards and no IT accountability, so the information is completely vulnerable to abuse.
For example, changing a plus and minus sign in a spreadsheet caused Fidelity to pay out $2.4 billion in dividends for their Magellan fund. A loss of $1.2 billion became a $2.4 billion dollar payout because of a spreadsheet cell formatting error.
Similarly, CA (Computer Associates) published their financials with a $60 million error due to a tiny spreadsheet mistake.
Spreadsheet error research carried out by audit firms, PWC and KPMG, show that around 9.0% of large spreadsheets contain errors.
How Do You Minimize Fraud in Your Company?
Those who perpetrate fraud include people of all ages, experience levels, salary levels, ethnic backgrounds, genders, geographic regions, and other demographic differentiators. In order to minimize and detect fraud, you need to implement corporate expense management software controls to create an environment where fraud cannot flourish.
The second (and final) article in this series discusses how you can stop fraud from occurring in your company. You can find this article at this site or at inlogik.com/12530+0+free-articles.htm.
|
- Dealing with Identity Theft
When a person falls into the hands of an identity thieve, then ongoing mental help is needed, since the person will struggle throughout their lifetime to resolve the loss. Instead of being the victim throughout...
- Protect Yourself from Identity Theft
Millions of Americans use credit cards, take out money from savings and checking accounts, write checks, and open new bank accounts everyday. By completing these everyday tasks, many Americans put themselves...
- Identity Theft who is hurt
Who is hurt when identity theft occurs? Few believe that the victims them self are the only ones hurt when identity theft occurs, however, contrary to their thinking, everyone is hurt when identity theft...
- Learning about Identity Theft
Learning about identity theft is one of the most important things you will do in your lifetime, since millions fall victim each year. If you have fallen victim of identity theft, the time to come to blows...
- Immediate Rules Identity Theft
Unfortunately, all of us are potential victims of identity theft. If you fall into the hands of identity theft, you will need to know the next steps to take to protect your self as much as possible. First,...
- Don’t be a Victim of Online Auction Fraud
Permission is granted for the below article to forward,reprint, distribute, use for ezine, newsletter, website,offer as free bonus or part of a product for sale as longas no changes are made and the byline,...
- How To Avoid Becoming A Victim of Identity Theft
With identity theft statistics currently at an all time high, and climbing, it just makes sense that we should all be doing everything we can to protect ourselves.One of the most prevalent yet overlooked...
- Identity Theft and Your Online Job Search
While identity theft is nothing new, the Web has opened up whole new world of opportunity for identity thieves.According to the FBI, identity theft is the top online fraud. The U.S. Federal Trade Commission...
- Rising Identity Theft Crimes
Each year identity theft is on the increase according to the Federal Trade Commission (FTC). Since 2004, a shocking rate of eleven "million" have fallen victim of identity theft. At the same time, experts...
- Victimized by Identity Theft
When a person is victimized by identity theft the person becomes a lifetime victim, simply put because regardless of how many times the law tells you they are working to resolve the problem, they are lying....
- Identity Theft Right Away
If you feel that your identity is stolen, inform the appropriate authorities immediately, including your bank, credit card issuers. The earlier you inform the credit card suppliers, banks, et cetera the...
- Tips to Avoid Identity Theft
What is rampant, spreading like wildfire and can kill life as you know it? No, not a deadly virus (but close). Answer: Identity theft. My stepson, Aaron, was a victim of identity theft recently. Someone...
- Save Your Credit Card from Fraud
Credit card fraud is a kind of fraud where a merchant is "tricked" into releasing merchandise or rendering services, believing that a credit card account will provide payment for goods/services.Typically,...
- Identity Theft Protection Safety Precautions
Identity theft has become the fastest growing criminal activity in the 20th Century, replacing illegal drug sales. For the perpetrators, it offers the highest profit margin with the least risk. In fact,...
- Identity Theft Crimes
The cost of identity theft crimes is ranging in the billions, since everyday someone is robbed of their identity. The FBI, Police Departments around the world, Government and other teams are joining to...
- Thievery of Identity
Thieves that focus on taking other peoples identities are often the worse thieves there are in society. We have petty thieves, grand thieves, and other types of thieves, but identity thieves claim the...
- Finding Peace after Identity Theft
When a person fall victim of identity theft, rarely do they find peace thereafter. Victims of identity theft often struggle with paperwork, reports, credit reports, courts, police and the list goes on....
- Resources for Identity Theft Victims
Having the right resources to prevent theft or else learn how to cope with identity theft and take the steps to recover from the loss is essential, since more victims occur daily. First, you will need...
- Theyre Phishing Your Identity Online
Identity Theft even though punishable by law with up to 15 years in prison, continues to flourish. And one increasingly popular way of capturing personal data is the form of phishing, which happens online.Many...
- Crime and Identity Theft
What is crime? Crime defined is an atrocity or enslavement, an act carried out by a single or group of individuals, targeting the population, or a set area to attack. When an identity thief gets hold of...
- Internet Privacy a Growing Concern
Lets face it, we look at stuff on the internet, in the privacy of our own homes that we would never look at in public. How often do you walk into your local bookstore and proudly by the latest Penthouse...
- ID Theft - Are You the Next Victim?
Identity theft is on the rise. One in ten of us have , or will be the victim of this crime. It is estimated that 500,000 to 700,000 Amercians become victims to indentity theft each year. You dont have...
- Monitoring Your Credit Is Easy As 1-2-3!
Thanks to the FACT(Fair and Accurate Credit Transactions) Act, all U.S. residents will be allowed one free credit report annually from each of the three major credit reporting agencies - Equifax, TransUnion,...
- Identity Theft And The Internet
LexisNexis, a provider of personal and financial data, recently reported that the personal information of as many as 310,000 people nationwide may have been stolen. This figure is nearly 10 times higher...
|
|
|
|
