Company Fraud: It’s always the person you trust the most

Feb. 27, 2014, 8:55am

We are safe from fraud, it will never happen to our company, nobody would really want to target us – common statements from company directors but can your business ever really be fraud-proof?

Quite simply all businesses are at risk, directors and owners who don’t protect themselves may be sitting targets.  If a fraudster has the knowledge and determination to attack your company’s bank balance then they will find a way.


The consequences can be severe; unsustainable financial loss or even the breakdown of the business as well as adverse publicity, loss of contracts and trust from clients and stakeholders.


It is surprising how many businesses under-estimate the threat posed by fraudsters.  The National Fraud Faculty estimates that in the UK alone fraud loss increased from £38bn to a staggering £73bn between 2011 and 2012.


Are you prepared or safe from fraud? The term knowledge is power has never been so true – you need to understand what drives someone to commit fraud, identify the warning signs, set in place stringent procedures to control potential deception and don’t give anyone the temptation or opportunity.  If fraud is committed you must be able to coerce the individual to the surface.


Research indicates that the profile of a typical fraudster is male, a member of the senior management team within a financial related position and has been employed for more than 10 years.  However, individuals with the opportunity to override controls are also prime suspects.  More staggering is that it is typically the fraudster’s first time offence and has a clean employment history.


What drives an individual to commit fraud has been a hot topic for years among auditors, who have whittled it down to three main factors referred to as the ‘fraud triangle’.  Firstly the fraudster’s motive may come from personal financial pressures, living beyond ones means or simply greed.  Secondly the person will rationalise their deception, for instance my employer doesn’t pay me enough or they wouldn’t miss the funds.  Thirdly the individual will have an opportunity to take advantage possibly due to a weakness within in the financial system and procedures of the business.


Fraud is not necessarily stealing from a bank account or obtaining cash from the petty cash float but also taking stock.  The individual could be stealing items and giving it away to friends or even selling at a reduced value.


Although the fraudster will be paying particular attention to hide their suspicious activity it is imperative to look out for the warning signs. The signs may come from the individual’s behavioural traits such as living beyond their means or from financial transactions made at strange times of the day or excessive year-end dealings.  They may also avoid taking any holidays or having time off to reduce the risk of another member of staff standing in for them.


The million pound question; how do we protect ourselves from financial deception?  Establishing rigorous controlled in-house procedures and regular audits are essential.  Educating staff of the risks of fraud and encouraging them to report any suspicious or mistrustful activity must be enforced.  On-the-book fraud will involve the person making illicit payments or activities which are recorded but in a disguised manner.  Identifying unusual activity in the paper trail and questioning will bring fraud to the surface.


We will work with the business to identify potential risks of fraud, reviewing transactions and paper trails with scepticism, collecting evidence and report any suspicious findings.


The very real consequences of fraud can be devastating to the future of a business and all parties involved; can you really afford to be a sitting target?


For more information about Tindle’s and its audit services to support businesses protect themselves from potential fraudster visit or contact 01642 878555

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