The impact fraud can have on an organisation can be monumental. Not only can it have a significant financial impact, but, depending on the type and severity, it can also destroy an organisation.
This is why it is important to work with a trusted Melbourne accountant to help you have critical controls in place to prevent or deter fraud. Lack of basic controls leave so many companies vulnerable to pilferage, embezzlement, and other types of misappropriation.
While there are many types of fraud, there are five that can cause the most damage.
Although it’s less common, financial statement fraud can be the most damaging to a company.
Overstating revenue, earnings and assets – along with understating liabilities (or just plain concealing them) – are the most common activities found with this type of fraud
Some of the more common types of fraud fall into the category of asset misappropriation, which closely-held businesses are most susceptible to.
This type of asset misappropriation consists of taking cash before it even enters the company’s accounting system.
It’s very hard to uncover because it requires finding evidence of something that hasn’t been recorded yet. And, it doesn’t require a lot of sophistication to execute, making it a popular choice among those that commit fraud.
Examples of asset misappropriation include, cheque tampering, accounts receivable skimming, fake billing schemes, payroll schemes, fake or duplicate expense reimbursement schemes, and inventory schemes.
Another common type of asset misappropriation is the misuse of company assets.
Not only is it problematic since it’s the unauthorized use of company assets, but it can also open up the company to significant liability.
As our world becomes increasingly driven by information and technology, an increase in the theft of intellectual property and trade secrets is on the rise.
Healthcare, insurance and banking are all industries that have billions of dollars flowing through their systems, making them prime targets for this type of fraudulent activity.
Bogus health insurance claims, business insurance claims, and fraudulent bankruptcies are all ways individuals commit this type of fraud.
Individuals targeted through cons, bogus telemarketing, email, Ponzi schemes, phishing, ID theft and other schemes, are all victims of consumer fraud.
Whether it’s an organisation system breach or bogus tax returns filed for large refunds, consumer fraud is on the rise.
Fraud can take many shapes and can impact an organisation in many ways – not just financially. You should know how and where your company may be vulnerable, and take the proper steps to protect against vulnerabilities.