Fraud - What Kinds Do We Have At Work?


By R W Cuthill Jr


According to the Association of Certified Fraud Examiners’ "Report To The Nation On Occupational Fraud And Abuse" (Report), “participants in the study estimate U.S. organizations lose 5% of their annual revenues to fraud. Applied to the estimated 2006 United States Gross Domestic Product, this 5% figure would translate to approximately $652 billion in fraud losses.” Of course these organizations must pass on this cost to consumers. This translates into each of us paying approximately 5% extra for fraud when we purchase a good or service. If the average household spends $40,000 for goods and services each year, their annual cost of fraud is $2,000.

Part of stopping occupation fraud is understanding it. The Report defines occupational fraud as, “The use of one’s occupation for personal enrichment through the deliberate misuse or misappropriation of the employing organization’s resources or assets.” We all know that people steal from their employers, even in very small amounts. Most of us at some time in our lives have taken home a few pencils, pads of paper, or perhaps some of the product sold by our employer. We also have heard about overstating of expense reports or the number of hours worked. These types of small frauds happen every day and cost us all billions of dollars each year. The Report breaks occupational fraud into three categories: asset misappropriation, corruption and fraudulent statements.

Asset misappropriation is the type of fraud we are most familiar with and includes the ones listed above. It is the largest type of occupational fraud in number, but not total amount. Corruption includes frauds such as bribery or conflicts of interest. Fraudulent statements generally include frauds relating to the organization’s accounting system and financial statements and are the largest type of occupational fraud by amount. Recent examples of fraudulent statements are Enron, Health South, World Com and other sensational frauds, which have been well publicized.

Occupational frauds are very hard to detect and most of them go undetected. According to the Report, the main detection tools are tips, accident, internal audit, external audit and notification by police. The Report points out that tips though anonymous hotlines is the most effective way of detecting occupational frauds. This means you are the one we count on to detect these frauds. When you are suspicious that a fraud may be happening in your workplace, do something about it. If your employer has a hotline, use it. If not, you can still provide an anonymous tip. Type out your suspicions and give it to a manager, who you do not believe is involved. You can mail it, put it in his in-box or use some other method, which will not identify you as the tipster.

What can you do to stop these frauds? Make sure you don’t commit them. This means the next time you need a few pencils at home, don’t take them from the office. You can buy them at the store and feel good about it when you do. This type of thinking, “I’m not hurting anyone”, only leads to encouraging others to do the same or it lets you rationalize that taking something more expensive is ok. You did not get caught taking the pencils, so take something more expensive next time. Secondly, when you are suspicious that a fraud may be happening, use the hotline. You don’t have to be sure. Someone skilled in investigating fraud will investigate and you won’t get your fellow employee in trouble, unless they deserve it. Thirdly, learn more about this type of fraud so you will know it when you see it. You are the main defense against occupational fraud.

Mr. Cuthill's practice is limited to court-appointed positions in large fraud cases. His work has produced the return of millions of dollars of investors' funds. For more information about him go to http://trusteeandexaminerCuthill.com.


More Resources

Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exiting

More Ethics Information:

Related Articles

No Credit is Due: Bad Telemarketing
Just a few minutes ago I was debating what to write about this week -- something interesting, perhaps, or maybe it was about time to give some credit to snails, I thought. Then, by some random stroke of luck, fate or writer's lightning (a term I created just now), I received a phone call from a credit card company.
Business Ethics: The Law of Corporate Karma
According to the shamanic traditions, the great mystery of being is that all things are alive and have a level of intelligence. This is because all things are a part of the Great Spirit.
The Views of Karl Marx VS Max Weber
Compare and contrast the views of Karl Marx and Max Weber with regards as to what motivates people to work.Karl Marx:[1] Exploitation[2] Proletariat have to sell their labour-power[3] The machines of the industrial revolution eliminate creativity require only the workers own labour, work is alienated, workers alienated.
Ethics in Business...A Lost Art
While watching Face the Nation one Sunday earlier this year, Bob Schiffer discussed the airline industry, his mother and ethics in business. Like Bob, I think it is a sad commentary today, that we have to police businesses.
The Deception Perception: Pay No Attention to the Man Behind the Curtain
The Deception PerceptionWithout a doubt, people would rather do business with someone they know, like, and trust. Credibility is critical.
Is Good Neighborliness Good Business?
[Note: This story is not a criticism of Buddhism. It is a story of neighborly love.
Six Reasons to Give
If you run a business, you undoubtedly feel many pressures on your time and money. Why would you want to add "giving to the community" to your "to do" list? Here are six reasons .
The Three Schools of Business Ethics
G. Richard Shell, author of Bargaining for Advantage: Negotiation Strategies for Reasonable People, identifies three primary schools of ethics in negotiation.
How To Detect Liars In Your Business & Personal Life
We live in a world full of lies and deception. Most of us (or all of us?) lied or were forced to do so, in a small or larger scale, because of some circumstances.
Communicable Corporate Diseases Hurting Business Sexcess!
Enron Executive goes to prison for 10 years, Martha Stewart is under house arrest, and Bill Clinton averages $150,000 per speaking engagement.It all comes down to decisions on the fly, no pun intended.
Private Carrier Pepsi Embraces Diversity Amongst Employees
Many companies claim to be committed to diversity, but private carrier Pepsico has proven their desire for a diverse employee base. With the progression of globalization in the world, Pepsi continues to embrace and value diversity in customers, suppliers and employees.
Business Ethics: An Oxymoron
An oxymoron: the juxtaposition of contradictory words or concepts. That is what we have with the term "Business Ethics".
Business Ethics: Functional Choices
Years of experience have taught me there is no such thing as "Business Ethics". If a person isn't ethical in the rest of their lives, their business ethics aren't worth the shoe leather they've worn out either.
Conflict: Not Necessarily a Bad Thing
I got yelled at tonight. Not the type of yelling that someone does when you've done something to tick someone off, but the kind of yelling that was a swift kick in the pants about something that I'm NOT doing.
Work Ethics - A Paradigm Shift
Work ethics is a hot topic in today's business and educational worlds. Yet, how do we define this hybrid phrase with the word work meaning more than a specific outcome and the word ethics being more than the values that enhance that outcome?When we say we are going to work, work becomes the place of employment.
Mind Your Own Damn Business Sexcess
You have certainly heard the expression "mind your own damn business" used in a multitude of contexts. The most typical being the don't kiss and tell type statements, often uttered by responsibly private individuals about their love life.
Tales from the Corporate Frontlines: Shifting Culture and Climate in Todays Corporate World
This articles relates to the AlphaMeasure core competency Culture and Climate. AlphaMeasure defines climate as the effect an organization has on the employees, while culture refers more to the acceptable behaviors, attitudes, and habits of the organization as a whole.
Tales from the Corporate Frontlines: Diversity And Success, In The Workplace
This article relates to the Diversity in the Workplace Competency, commonly evaluated in employee satisfaction surveys. This competency explores whether your organization provides understanding and supports interaction among diverse population groups while respecting individuals' personal values and ideas.
The Need to Survive; A Death Knell For Organizations
Changing the driving force upon which business decisions are based is crucial in order to not only restore ethics in business but to truly improve the lives of those whom they were meant to benefit: executives, employees and consumers. After all, weren't business activities meant to improve the state of existence of human beings on this planet?So what is this driving force that I am referring to? Well its the "fear of not surviving".
Do Organizations Serve Us Or Do We Serve Organizations
We have seen an erosion in the confidence that society has in organizational leadership and its integrity recently with the numerous accounting scandals that have become public.Clearly this has led to the demise of several large organizations.