CREDIT CRUNCH PROMPTS INTERNAL FRAUD WARNING (17/07/08)
Buress Hodgson is warning managers and business owners to be extra vigilant after a rise in the number of businesses reporting cases of internal fraud.
The Canterbury-based firm of Chartered Accountants and business advisers, says recent research suggests the credit crunch is pushing up the levels of corporate fraud, of which internal infractions make up a large part of the overall picture.
Examples include sales personnel "upping" their business mileage, and therefore travel expenses, thinking that artificial increases in petrol costs will be disguised by the real increases at the pumps.
Other examples that Burgess Hodgson has witnessed involve simple pilfering of stock from company premises, or fraudulent invoices from imaginary suppliers for services such as ‘premises repairs’, ‘boiler service’ or ‘gardening. These are ‘settled’ by a cheque - which is made payable to the employee. One case involved over £250,000 - including a false employment tribune claim for a non-existent employee - the fraudster was reported to the police and eventually was taken to court.
“The most blatant invoices were false ones from the company's solicitors for ‘redundancy advice,” says Burgess Hodgson partner Ken Jones. “There were so many false invoices that if you added up all the staff who were to be made redundant there would have been none employed!
“Expense claims can sometimes be quite ‘colourful’,” says Ken, “although, when the economy is buoyant, the discrepancies tend to be fairly minor, and companies may take a more relaxed approach.
“However, when times get tough, some employees may cross the line and deliberately fabricate false claims in a bid to bolster their salaries. This is no longer ‘colourful’ but simply a case staff defrauding their employers.”
One solution could be to organise employee training sessions on fraud policy. “This immediately demonstrates to staff that you are being vigilant,” says Ken. “Employees, who for the most part are not ‘thieves’ but may be feeling the economic pinch, may be dissuaded from crossing the line.”
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