The Reasons Why A Business Should Be On The Lookout For Fraud

The effects of fraud on a business are not fully known because of the nature of the crime. It is the use of deception to obtain a financial reward, which means that the victim is often unaware that losses are occurring. It is only when a fraud is discovered, because the losses are so big or sometimes just by accident, that something is done about it. Often this can be too late to save a business.

A connection possibly exists between the level of fraud and the success of a country's economy. As an example, in countries experiencing widescale tax avoidance these is no investment available for public facilities such as hospitals, police forces and the like. For a business, a fraudster can cause a business to fail completely. Often fraudsters are only found out if the internal workings of a business are opened up when being scrutinised by an insolvency practitioner.

What can be done to stop the problem of fraud happening at all? Money spent on fraud prevention need not be substantial to be effective, but when it is estimated that 7% of business profits on average are lost to fraud each year, spending on a few fraud prevention measures should merit a reasonable priority from management!

The single most effective measure a company can take to prevent fraud, and possibly the cheapest, is to introduce a "Fraud Policy". It is the business saying that it recognises it must take a firm stance against the possibility of fraud, the message being put formally in writing and making sure that all its staff acknowledge this position.

A fraud policy could be an expensive publication in a multi-national organisation. On the other hand, it could easily be one sheet of typed paper in a small concern. It must communicate important messages to the whole workforce, managers included. This message can be brief:

· The company will not tolerate fraud

· The company expects all staff to take the same position

· Suspicions of fraud must be communicated to the appropriate authority

· All frauds will be fully investigated and prosecuted

When managers install a suitably worded fraud policy and begin to demonstrate from the top that fraud and malpractice is not tolerated, the tone of the company improves and provides a less fertile breeding ground for fraud. The policy can clearly show that a company is refusing to be complacent about the issue of fraud, and this sort of culture will act as a deterrent to most determined fraudsters with an eye on the company's assets. You can not be sure of stopping every possible fraud, but a fraud policy document in place will prevent most of them and reduce the risk substantially. It is a very necessary place to start prior to introducing improved accounting controls to prevent fraud.

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Mark Jenner is a fellow of the Institure of Chartered Accountants in England and Wales, a Certified Fraud Examiner and holds a Masters Degree in Fraud Management. He works as a forensic accountant specialising in fraud matters. For more information and details of past cases his web site can be visited at =>http://www.mark-jenner.com

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