Business fraud is the cause of the downfall of many businesses today. Fraud happens in many types. We have bribery, corruption, asset misappropriation and financial statement fraud. If fraud is started by an employee it in many cases involves more than one type of fraud. It is not easy to detect when business fraud is taking place. The employees are too clever to make sure that it does not appear on the official accounts. The only way a business fraud can be identified is by receiving a hint from one of the people involved or an employee who observes from far, an outsider or a customer. This article will explain further about financial fraud in business. Read on:
This type of fraud involves a member of the staff who takes advantage of their position to take from the employees. It is in many cases committed by people trusted to manage the company’s assets and interests like directors, employees, and board members. The frauds here aim at stealing things like company’s sensitive data, patents, formulas, inventory, vouchers, credit notes, money or cheque forgery. A company suffering from asset misappropriation will have issues with cash flow, employee motivation and company’s reputation. It is the most common type of fraud affecting about 90% of businesses.
Corruption and bribery
This type of fraud is next in the line. It is less common compared to misappropriation, but the occurrence level is high compared to other types of fraud. When bribery occurs, the company will lose at least half a million dollars. The schemes around bribery range from manipulation of contracts, substitution of inferior goods, kickbacks, shell company schemes and bribes to influence major decisions.
Financial statement fraud
This type of fraud does not occur often but carries a lot with itself when it happens. Research reports that a company will lose more than 2 million dollars in every case of financial statement fraud. This type of fraud happens when an individual falsifies income statements or earnings to get financial gain. It can involve, improvement of bonuses, manipulation of company’s records for favorable loan terms and influencing stock price. The above are common types of fraud that result in the downfall of many companies. As the employer, you must be very keen to notice some of the above happenings. As mentioned earlier, it is the employees who carry out the frauds. Why is so? Some of them might be underpaid or mistreated. Your employees are the biggest asset you have, treat them well, and you will get the best out of them. The vice versa is true.