2014 Report To The Nation On Occupational Fraud

Employee fraud is a significant problem faced by all types of organizations. According to the 2014 Report to the Nation on Occupational Fraud and Abuse, research shows that the typical organization loses 5% of its annual revenue each year due to employee fraud (Reed 1). Every organization should have a plan in place as preventing fraud is much easier than recovering from the losses after a fraud has been committed. In the field on accountancy, fraud can be broken into three categories: financial statement fraud, asset misappropriation and corruption.
Financial statements fraud causes most median loss as it involves misstating information in the company financial reports. According to 2014 Report to the Nation on Occupational Fraud and Abuse, only 9% of cases involve financial statements fraud, but the 9% has the biggest financial impact, costing over one million loss (2). To prevent this type of fraud, owner or manager who have not reconciled the statement, should hire an outside accountant.

Although it is least costly but it is the most common fraud; up to 90% of all fraud cases studied asset misappropriation is most common (Reed 2). Examples of asset misappropriation are stealing cash before or after it’s been recorded, making a fictitious expense reimbursement claim or stealing non-cash assets of the organization. Most common is payroll fraud. When there is no surveillance on accounting activities, dishonest employee can make a fake supplier and forge documentation of fictitious purchase transactions. To prevent fraud in accounting; either personally prepare the daily cash deposits or compare the deposits made by employees with the record of cash and checks