EXPENSE FRAUD IN YOUR BUSINESS - WHAT'S YOUR TONE?
Unfortunately, we’re not talking about harmony and resonance – we’re talking about attitude, awareness and discipline. Keeping your organisation safe from expense fraud requires strong internal controls, a commitment to investigate and respond to allegations of fraud and a fraud-awareness culture. Whether your organisation is a large corporation or a small enterprise, you can fall victim to fraud.
As we work alongside our clients this financial year one of the big issues that arises for businesses is fraud. Which leads us to ponder the big question – why?
What leads to expense fraud in a business?
The formula for fraud to be committed boils down to three key factors – pressure, opportunity and rationalisation.
Pressure is what motivates the perpetrator in the first place. This motivation sometimes stems from personal hardship or addiction. Other times, it is for more selfish reasons, including career, revenge, or lifestyle.
Opportunity relates to the method to commit the fraud. Usually, this is an abuse of a perpetrator’s position of trust. This is usually with a view to concealing their act and minimising the chance of being caught.
Rationalisation is the third ingredient – this is how a fraudster justifies or excuses their actions. Whilst some rationalisations appear “innocent” (e.g. “I was only borrowing the money…”, “I had to steal to feed my family…”), perhaps more surprising is that there is sometimes a sense of entitlement (“I’ve been underpaid for years…”).
Fraud in business is more common than you think
Sadly, organisations often neglect their fraud risk exposure through downplaying the value or the risk. For example, labelling fraud as petty theft (still technically fraud) due to the purported insignificance in value. Alarmingly, some organisations ignore the risk entirely (“It won’t happen to us”).
I believe, and research has shown that the “tone at the top” and an effective internal control environment are vital in preventing and deterring the risk of fraud. From our experience as experts in this area of business, fraud is a LOT more prevalent than you would ever imagine, and most business owners are unaware of it until an audit is done on the business.
Audit and Assurance to minimise your risk
We at Bishop Collins Audit have the experience to review and assess your internal controls, provide insight and assistance to develop a “fraud awareness” culture, and help you identify and manage your exposure to fraud risks. Please give us a call on 02 4353 2333 and speak with our Director of Audit Martin Le Marchant