Occupational Fraud – Don’t Let It Derail Your Business

When people think of private investigations, they rarely see them as tools for safeguarding a business. Companies large and small face the problem of occupational fraud, which can manifest in several ways. From asset misappropriations to corruption, to fraudulent financial reporting, it is the job of private investigators to get to the source of the fraud so that management and the law can act accordingly. Getting a better understanding occupational fraud is the first step in protecting your business.

Types of Occupational Fraud

Occupational fraud can be categorized into one of three major categories  

• Asset misappropriations
• Corruption
• Fraudulent financial reporting.

Asset misappropriations include any scheme that involves the theft or misuse of an organization’s financial or physical assets. Corruption refers to any scheme where someone uses their influence in a business transaction to receive an unauthorized benefit. Finally, fraudulent financial reporting involves the falsification of an organization’s financial statements to make it seem more or less profitable than it is. Occupational fraud may fall into more than one of these categories.

How Does It Happen?

Corruption fraud is typically facilitated through conflicts of interest, bribery, illegal gratuities as well as extortion. Fraudulent financial reporting occurs when financial statements are augmented through reporting fictitious revenues, concealing liabilities or expenses, recording revenues in the wrong period, improperly valuing assets or failing to disclose important information. Non-cash misappropriations can occur through the theft of inventory or physical assets from a business. These also include the release of proprietary information and the theft of securities.

Victims of Occupational Fraud

Through television and media, fraud has become associated with certain types of businesses and occupations. In reality, no particular industry is more susceptible to fraud than others. An organization’s degree of government oversight, on the other hand, is a factor in their susceptibility to fraud. Private companies are the most susceptible to fraud, followed by public companies, governments and non-profit organizations.

The size of an organization is another telling factor of its susceptibility to fraud. Organizations with less than 100 employees were the most likely to suffer a loss from fraud. This is probably due to the fact that they have less resources to deter and detect fraudulent activities within their business.

Perpetrators of Occupational Fraud

It’s important to keep in mind, especially when investigating a case of occupational fraud, that fraud can be committed by any employee of an organization. This includes executives, managers and employees. The amount of power a given person has within a company dictates how much financial damage they are able to inflict on a company. Surprisingly, criminal histories play a very small role in determining whether someone will perpetrate fraud. Perpetrators of occupational fraud are rarely career criminals, but opportunists instead.

Fraud Losses

Once fraud has been detected,organizations that have been victimized very rarely make a full recovery of their losses. A large percentage of these organizations don’t recover any of their losses. This is why it is so important to limit fraud losses and protect assets through fraud deterrence strategies.

Hiring The Experts

Do you suspect your place of business is being affected by fraud? It’s essential to hire trained and experienced professionals to investigate. South and Associates has extensive experience in conducting high level corporate investigations in both the public and private sectors. We conduct these investigations in an experienced professional manner and obtain detailed evidence while maintaining 100% confidentiality to protect both your organization and employees from a number of potential threats. Contact us today.