Fraud Prevention

I agree with the above statement, business owners and managers think that fraud won't occur in their business because their employees past performance has been acceptable, and therefore it will be in the future to. 

This stance is highly problematic as according to the KPMG 2010 Fraud Survey the total cost of fraud for all the respondents was $345.4 million. The respondents also admitted that only 1/3 of total losses were being detected. 65% of the major frauds were committed by employees who usually acted alone in the organisation. So once a firm is aware that fraud is a serious potential risk, it needs to take action to prevent it from happening.

Firstly the company should promote a culture that deters fraud from occurring (Sacks, 2004). This is done by hiring honest people and providing them with fraud awareness training, creating a positive work environment and development of a code of ethics. Finally an employee assistance program should be implemented to make sure employees don't feel any unhealthy pressure about there job. 

This final point was not done in my first job; I felt very unsure about what to do in a lot of situations but received little to no help in regard to these issues. This led to me not really caring about my job as I felt undervalued. Whilst I had no intention to commit fraud, it doesn't mean others with the opportunity to do so won't either.

Secondly therefore, the firm has to eliminate opportunities to commit fraud (Sacks, 2004). This can be done by having strict internal controls, discouraging collusion, monitoring employees, providing a tip hot-line, create an expectation of punishment and audit proactively. 

By having both these policies in place, it will be less likely fraud will occur in the organisation.

Sacks, S. E. (2004). Fraud risk: Are you prepared? Journal of Accountancy, 198(3), 57-63. http://search.proquest.com/docview/206782293?accountid=13380

Interesting articles:

Here is a more interesting take on fraud detection by merely looking at the first numbers of a data set:
http://www.kirix.com/blog/2008/07/22/fun-and-fraud-detection-with-benfords-law/

Here is how to detect fraud by monitoring user behaviour:
http://search.proquest.com.ezp01.library.qut.edu.au/docview/230116396