Issue No. 65 - June/July 2012
Staff fraud – what employers can do
by Grant Martinella
Harder financial times and a slowing economy are contributing to an increase in employee fraud in Australia.
In difficult economic times the typical fraudster is more easily able to rationalise their actions and are more motivated to engage in misconduct to maintain their own lifestyle requirements.
Evidence shows the range and types of fraud committed are increasing with the most common types of frauds including:
• Manipulation of source data including pay rates, new suppliers or employees and bank accounts;
• Falsifying invoices and expense claims;
• Electronically transferring funds into personal accounts;
• Receiving ‘kickbacks’ from suppliers;
• Creating unauthorised accounting adjustments to the financial statements; and
• Misappropriating company assets or inventories.
So what can businesses do to counteract this growing trend?
Those charged with governance can impact the level of opportunities available to employees to commit and engage in misconduct without the risk of being detected.
Evidence tells us that the typical fraud is committed by trusted long term employees who are acting alone, and the most significant factor in detecting committed fraud is the internal controls employed by an organisation.
The internal control environment and more specifically, segregation of duties amongst your employees is key to preventing or detecting fraud.
As an example, assume that your payroll officer is able to create new employee records within the accounting system, alter source data such as pay rates, process the weekly pay run and approve the physical EFT payment through the bank account.
There is a significant opportunity in the example above for the employee to adjust their own pay rate or create a false employee with their own bank account details to misappropriate funds of the business.
Now assume that in the example given above, the proce...