The Basic of Preventing Fraud

The Basic of Preventing Fraud

Does your organization have a strategy to fight fraud? Since the risks of fraud cannot be underestimated, it is not enough just to detect and investigate fraud. Fraud can never be eliminated from business entirely, simply because collusion can always overcome normal organizational controls. To combat fraud, an organization needs a different and fresh approach that will need to cover all aspects of the fraud cycle.

A preventive action should commence with the recruitment procedure. Before a company opens its doors to new employees, managers should stop and ask themselves “Do I possess adequate knowledge about this individual to entrust them with my finances, confidential data, and, most importantly, my reputation?” Many companies hold the belief that their recruitment procedures effectively address this concern. However, they should be mindful of the following:

  • 30% of job applicants have confessed to providing false information during the application process.
  • 18% of employees believe it is necessary to embellish their resumes.
  • 34% of managers neglect to conduct background checks on applicants.
  • 36% of organizations assert that inaccuracies in CVs result in significant time and monetary losses.

Organizations should check each new candidate thoroughly. The more senior the position, the more thorough this checking should be. Senior staff has more opportunity to commit fraud as they are in positions of trust and tend to have the ability to authorize payments and approve contracts. They are also more likely to commit frauds that can permanently damage their organization.

During the recruitment process, consider these:

  • Ask all potential employees to complete a detailed application form
  • Look for gaps in employment history
  • Request written references and check by telephone
  • Check all qualifications
  • Carry out in-depth due diligence in relation to senior employees
  • Obtain criminal records
  • Carry out background checks on temporary and contract staff as well

Background checks should also cover an individual’s complete membership of professional bodies, financial status, directorships held and any disqualifications, last but not least, media and Internet search. Remember, time and money spent at this stage can save thousands of dollars in investigation and legal costs when a fraud comes to light.



Internal Control and Fraud Detection


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