Definition of Fraud:
Accounting fraud is intentional control of monetary explanations to make a veneer of an organization’s money related wellbeing. It includes a worker, account or the association itself and is misdirecting to financial specialists and investors. An organization can distort its money related proclamations by exaggerating its income or resources, not recording costs and under-recording liabilities.
Three Reasons Why to Commit Fraud:
Pressure in the work environment: When employees are under stressful environment, they might think bad and take unethical decisions only to reduce their problems.
The causes of pressure can be from multiple factors such as, family issues, financial issues, commanding manager or influence of coworkers.
An unappreciated employee: If the employer is not appreciated from either his/her manager, colleagues, or the work of his/her is not appreciated and valued might lead to fraud to prove themselves to others and be much valuable than before.
A chance to commit fraud: There is no chance to commit fraud unless it is available to do so. Even if the employee is under pressure or he/she is not appreciated it is impossible for a fraud to happen if there is no opportunity. An opportunity could be a weakness in the organization’s management system. Such as lack of financial auditing.
Types of Fraud:
Stealing items from business property
Fraud of education certificate
Claiming benefits that he/she doesn’t deserve
Examples of Fraud:
How to Prevent Fraud:
Recently KPMG made a survey about Fraud and the results were that organizations are reporting more experiences of fraud compared to previous years and that three out of four organizations have uncovered fraud.
Therefore, they made a list of top nine internal controls intended to prevent and detect fraud
1- Use a system of checks and balances to ensure no one person has single control over all parts of a financial transactions.
2- Reconcile the agency bank accounts every month.
3- Restrict use of agency credit cards and audits all charges that were made to the agency credit cards or accounts to ensure they were only business-related and not for personal use.
4- Period meetings with Board of Directors to provide oversight of agency operations and management.
5- Prepare all fiscal policies and procedures in writing through the company’s quality management and obtain Board of Directors approval.
6- Ensure that company’s assets such as equipments, vehicles, cell phones, and other company’s resources are used only for official business.
7- Protect petty cash funds and other cash funds.
8- Protect checks against fraudulent use.
9- Avoid or discourage related party transactions.
Definition of Fraud: