FRAUD | 17
Expense fraud WHAT IS FRAUD? Fraud is broadly defined as an act on behalf of a person that is deceptive or deceitful in some way in that it causes them to receive a benefit that they are not entitled to. This way some other person or organisation to suffer some disadvantage. Keeping your organisation safe from expense fraud requires strong internal controls, a commitment to investigate and respond to allegations of fraud and a fraud-awareness culture. Unfortunately, it’s not about harmony and resonance – it’s about attitude, awareness and discipline Whether your facility is large or small, you can fall victim to fraud. Considering the frequency and range of fraud that is possible within the storage business, especially for those which are remotely managed, knowing what to look for is key to any preventive effort. Though many of these schemes often deduct only minor amounts of money from a business’s total assets, these small numbers can add up to serious losses. Knowledge is the first step to prevention. Fraud in business is on the rise, which leads us to ponder the big question – why? What leads to expense fraud in a business? The formula for fraud to be committed boils down to three key factors – pressure, opportunity and rationalisation.
PRESSURE Pressure is what motivates the perpetrator in the first place. This motivation sometimes stems from personal hardship or addiction. Other times, it is for more selfish reasons, including career, revenge, or lifestyle.
OPPORTUNITY Opportunity relates to the method to commit the fraud. Usually, this is an abuse of a perpetrator’s position of trust. This is usually with a view to concealing their act and minimising the chance of being caught.
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Keeping your organisation safe from expense fraud requires strong internal controls, a commitment to investigate and respond to allegations of fraud and a fraudawareness culture. RATIONALISATION Rationalisation is the third ingredient – this is how a fraudster justifies or excuses their actions. Whilst some rationalisations appear “innocent” (e.g. “I was only borrowing the money…”, “I had to steal to feed my family…”), perhaps more surprising is that there is sometimes a sense of entitlement (“I’ve been underpaid for years…”).
ignore the risk entirely (“It won’t happen to us”). Research has shown that the “tone at the top” and an effective internal control environment are vital in preventing and deterring the risk of fraud. From our experience as experts in this area of business, fraud is a LOT more prevalent than you would ever imagine, and most business owners are unaware of it until an audit is done on the business.
AUDIT AND ASSURANCE TO MINIMISE YOUR RISK Bishop Collins Audit have the experience to review and assess your internal controls, provide insight and assistance to develop a “fraud awareness” culture, and help you identify and manage your exposure to fraud risks. l
FRAUD IN BUSINESS IS MORE COMMON THAN YOU THINK Sadly, organisations often neglect their fraud risk exposure through downplaying the value or the risk. For example, labelling fraud as petty theft (still technically fraud) due to the purported insignificance in value. Alarmingly, some organisations
Contact SSAA Member, Bishop Collins Chartered Accountants – (02) 4353 2333 urgently if you need assistance in transitioning to STP reporting and compliance.
NOVEMBER / DECEMBER 2019 INSIDER 110
