Companies warned to watch for ten signs of employee fraud
Leading accountants and business advisers, PKF is warning businesses in the Region to be vigilant for fraud involving employees and has issued a list of ten typical warning signs to look out for. PKF predicts that the combined pressures of the credit crunch and the economic downturn will give rise to new cases of fraudulent activity.
Marilyn Martin, PKF’s Partner specialising in forensic accounting commented, “We expect that the recession, low pay increases, the fear of unemployment, coupled with increased levels of personal debts will tempt an increasing number of previously honest staff to execute frauds. Forensic accountants traditionally see the recipe for employee fraud as having three key ingredients: personal or organisational pressures, opportunities, and the belief the crime would go undetected. All types and sizes of businesses are likely to be affected, but the most vulnerable companies are those with weak or inadequate systems of internal control, or those which fail to ensure adequate supervisory cheques over employees’ work.”
Fraud committed by employees is wide ranging from straightforward theft, inflating expense claims, data security breaches or obtaining property by deception, to falsifying information such as qualifications or references on a job application form.
Though fraud can take many different forms there are a number of typical warning signs that may indicate potential wrongdoing:
• Staff without high workloads being under stress
• Marked personality changes
• Staff always working late (often being last to leave)
• Reluctance to take holidays and time off
• Disproportionate and unexplained wealth; staff apparently living beyond their means
• High staff turnover (new staff resigning quickly)
• An unexpected increase in the level of customer complaints
• Rising overhead and supply costs, without any ready explanation
• Suppliers and contractors insisting on dealing with only one individual
• Suspense account balances with no satisfactory explanation.
Marilyn Martin continued, “Taken in isolation, these signs are not necessarily cause of concern or indeed evidence that a fraud has taken place. Nevertheless, these indicators should prompt employers to investigate further, even if only informally at first, as few employee frauds occur without one of more of these signs being exhibited. If left undetected, what started out as a small fraud to repay a credit card for example - can quickly escalate as there is no incentive for the perpetrator to stop.
“Fraud thrives in a recession, so employers need to ensure that they have good management practices in places to deter and detect fraudulent activity. Safeguarding a business against employee fraud is all about having an effective and reliable system of internal controls. Systems - in particular those covering cash collection, recording and expenditure payments – should be actively reviewed to ensure that they are operating satisfactorily and reliably.”
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For further information:
Gordon or Liz at MAW Communications, 01603 505845, gordon@mawcomms.co.uk
Notes to Editors:
1. PKF (UK) LLP is a leading firm of accountants and business advisers with more than 1,500 partners and staff operating in 23 offices in the UK mainland firm, incorporating a wholly-owned financial planning company and associated offshore practices. The firm specialises in advising growing and entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic. The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm’s web site is www.pkf.co.uk
2. PKF (UK) LLP also offers financial services through its FSA authorised company, PKF Financial Planning Limited. PKF (Isle of Man) LLC is a limited liability company registered in the Isle of Man. PKF (Guernsey) Limited is incorporated in Guernsey.
3. PKF (UK) LLP is a member firm of the PKF International Limited network of legally independent firms. The PKF International Limited network has around 15,000 people operating in 120 countries around the world.