Earlier this year, a KPMG survey of 281 Australia and New Zealand businesses found a “devastating amount of insider fraud”, with employees responsible for three quarters of major fraud incidents that occurred in 2012.
Australian accounting and advisory firm William Buck is often enlisted by SMEs to pin down suspected perpetrators.
It says many fraudsters are picked up by whistle-blowers, so it could be up to you to raise some red flags if any of the below seem familiar:
1. Results that don’t meet expectations or trends.
If sales figures are up and staff numbers are down, but your balance sheet hasn’t improved, someone might be cooking the books.
Look out for any unauthorised accounting adjustments to financial statements and consider using software to report on any source data changes and discrepancies.
2. Key people never taking leave.
According to Grant Martinella, director of William Buck, fraudsters may be reluctant to go on leave to avoid having someone else take over their responsibilities and look over their work while they’re gone.
“A lot of fraud is perpetrated by higher level managers,” he explains. “The key factor of them being picked up is by a whistleblower that may have picked up their role while they’re on leave and noticed discrepancies.”
The accountancy recommends that businesses enforce compulsory annual leave, segregate duties so people aren’t acting alone, and ensure that there are clear reporting channels.
3. People not documenting transactions.
If you’ve made your monthly sales target early but face a quiet month ahead, it may be tempting to delay reporting some sales so they count as next month’s wins.
Martinella says that’s an example of financial statement fraud and misappropriation of company assets because you aren’t really entitled to the second month’s bonus – you’ve lied to get it.
4. Bank reconciliation processes that are always late.
Some cases of fraud are more complex than others. Managers may make up false suppliers or employees to siphon out more money from the business, or accountants might tinker with colleagues’ superannuation account numbers so they get the money instead.
William Buck says strong, well-controlled accounting practices should run like clockwork. “Delays make it harder to match up transcations, increasing the opportunity for things to go amiss,” Martinella explains.
5. A change in behaviour or lifestyle.
“The main motivation around fraud in the last few years are financial pressures, lifestyle or greed,” Martinella says.
Those pressures and lifestyle changes may seep into fraudsters’ behaviours. Previously open finance managers may clam up and people may seem more agitated, defensive or vague.
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