Financial Fraud in an Organization

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Fraud

Fraud is an intentional act to deceive a client with a motive to deprive them money or any property that can be quantified in monetary terms. The victim of fraud loses the property and is entitled to a lawsuit for fraud is a crime. The act is malicious and thus punishable in a court of law. Damages may be awarded to the victim while the defendant has to pay the damages has caused. Fraud is very common in organizations where one or many clients in an organization may wish to deceive the organization off with money or property. Most fraud crimes occur when low control is offered for use of the organization’s resources, and thus they take advantage of the no control policy to fraud. Fraud results in loss to the company as it loses money and property to its employees. The employees trick the company in order to benefit themselves from the company resources. Proper records of the entire company asset should be kept and maintained in order to account for each item or machinery and know who is in charge of the asset. Proper record helps to identify default assets and replacement is done so that the operations of the organization do not come to a halt. When an organization wishes to hire an individual, the human resource department needs to know the background of the employee. This will help to give a good record of all employees that the company wishes to hire, as well as their professionalism and accountability (Rose-Ackerman and Søreide, 65).

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Types of fraud

Asset misappropriation

Asset misappropriation can be defined as the act of misuse of a company’s asset, or even theft of the asset by employees. A lot of asset misappropriation occurs among people with responsibility in the organization. When a chance comes along, these individuals tend to be controlled by self interest and end up misusing the company asset for personal benefit. Asset misappropriation may be internal or external in any given organization. Thus, proper control and security of these assets should be maintained. Auditing is a good and effective way to ensure that company assets are being used in the right manner. Fraud in the organization affects the working conditions of other employees. This is when one individual fraudulently takes a property of the company for personal use rather than have the rest of the other employees benefiting from the same. For example, a manager may decide to use print papers for his personal printing and thus cause a delay and waste of company resources (“Fraud Analysis Techniques Using Acl: Epub Edition,” 14).

Corruption

Corruption can be defined as the act of embezzlement of an organization’s resources and may also be termed as bribery. Corruption is the use of power to influence others to make decisions that favor one’s personal interest. Corruption may also occur when hiring employees in the organization. In this case, a manager in the organization may field his or her own candidate who lacks the necessary qualifications for the position. It may occur when an individual bribes a management team member so as to have a contract signed for him or her (Rose-Ackerman and Søreide, 65).

Financial information fraud

Financial fraud is the most common fraud in an organization. In this case, people with authority access financial information about an organization and manipulate the accounts for their own suitability without knowledge of the other employees. Accountants may wish to change the figures in the book of accounts. This constitutes fraud as they may post less money received and pocket the rest of the money. This causes the organization to suffer losses as not all revenue in the organization are posted on the books of accounts as required. Internal auditors should be hired to lower the risk of this fraud occurring in the organization. Notably, millions of dollars are lost by organizations through this fraud (“Anti-fraud Risk and Control Workbook: Epub Edition”, 21).

Cyber crime

Cyber crime can be defined as the act of a person using a computer connected to a network to commit a crime. This crime may be geared towards deceiving a group of people out of their assets or money. Cyber crime also constitutes a crime as it takes a computer operator to intentionally harm or cause harm to an organization that can lead to loss. The act is geared towards harming the reputation of an individual or an organization through a malicious act by using modern technology to commit the act. Cyber crime has been known to cause harm and threaten national security. It includes website hacking or account cracking to infringe some document that are confidential to a given individual or organization. Cyber crime tends to ruin the issue of confidentiality regarding a person’s information. Over the years, the crime has risen to include the theft of a person’s finances from his or her account by a hacker who accesses the financial details and fraudulently transfers money to his personal account (Wall, 56).

How to prevent fraud in an organization

Many frauds that occur in business organization are due to poor control of the organization’s assets and its machinery. This makes it easy for an employee to circumnavigate the system and thus carry out fraud. Fraud in an organization may cause the organization to fail in achieving its set goals as its resources are used in other non objective activities by employees. This may cause delays in the progress and growth of the organization. The organization needs to keep and maintain proper control of its process where a supervisor will always keep a good record of the assets of the company and update the system. This will ensure that none of the assets go missing from the store. An organization should hire accountable employees who will always guard the resources of the company. Fraud in the organization affects the working conditions of other employees. For example, a manager may use the company resources for personal gain thereby causing a delay and wastage of company resources.

This personal greed also can be termed as a fraud when one employee uses the resources of the company for personal gain. This should be discouraged at all cost. The company continues to incur some extra costs that are not geared towards its operations. Proper records of the entire company asset should be kept and maintained to account for the company assets and identify the people in charge of the assets. Proper record helps to identify default assets and replacement is done to ensure that the operations of the organization do not come to a halt. When an organization wishes to hire an individual, the human resource department should conduct a background check on the potential recruit. This will ensure that only the best employees in regard to professionalism and accountability are hired by the company (Wells, 60).

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The employer should be able to trust new employees with the assets of the company, as well as other resources. When a manager is hiring a new employee, he or she should scrutinize the Curriculum Vitae of the potential employee and note if they have cheated on any of their qualification. Those who have found to have cheated should not be hired as they tend to have fraudulent tendencies. Thus, the character of an individual will always be reflected by how he or she carries and operates on the job. Another way to prevent fraud in an organization is by creating a good working environment where each employee is rewarded competitively to avoid the tendency of engaging in fraud. Well motivated employees can work well in the organization. This helps them to protect the organization’s resources and report any misappropriation that may be intended by another work mate. Control of financial information can be emphasized by hiring qualified accountants and bookkeepers who will carry out their tasks with professionalism and accountability. Access to financial information and documents should be minimized to a few people who have the responsibility of making sure that the information is safe and in order. Internal auditors should be hired to lower the risk of this fraud ever occurring in the organization. Passwords may be issued to individuals with the responsibility of handling crucial information and documents in the organization where their work is monitored by a group of supervisors (Wells, 96).

References

Anti-fraud Risk and Control Workbook: Epub Edition. John Wiley & Sons Inc, 2009. Print.

Fraud Analysis Techniques Using Acl: Epub Edition. John Wiley & Sons Inc, 2009. Print.

Rose-Ackerman, Susan, and T. Søreide. International Handbook on the Economics of Corruption: Volume 2. Cheltenham: Edward Elgar, 2011. Print.

Wall, David. Cybercrime: The Transformation of Crime in the Information Age. Cambridge: Polity, 2007. Print.

Wells, Joseph T. Corporate Fraud Handbook: Prevention and Detection. Hoboken, N.J: Wiley, 2011. Print.

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BusinessEssay. 2022. "Financial Fraud in an Organization." May 1, 2022. https://business-essay.com/financial-fraud-in-an-organization/.

1. BusinessEssay. "Financial Fraud in an Organization." May 1, 2022. https://business-essay.com/financial-fraud-in-an-organization/.


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BusinessEssay. "Financial Fraud in an Organization." May 1, 2022. https://business-essay.com/financial-fraud-in-an-organization/.