In these times of the so called economic meltdown, certain realities hit the businesses:
· Companies experience low/ reduced Sales
· Companies experience low/ reduced growth
· Companies experience deteriorating cash flows
With all the above hitting you, you don’t want an increase in Fraud added onto it. Hence like never before ensuring sound financial and business controls is key and fundamental.
Further, retrenchments have also become a buzzword in the work place. This too if not managed handled effectively an equitably, can also increase the risk of fraud. According to research, white collar crime is real and on the increase.
The National Bargaining Council (“NBC”) stated, in 2005, that chances of a company doing business in SA being defrauded, was 2 X that of their counterparts in the rest of the world and that approx 83% of companies reported white collar crime of some form or another.
According to the most recent official crime statistics (June 2008), the number of reported cases of commercial crimes rose by an alarming 21%. It’s not just the case of discovered fraud as a direct consequence of downturn. However with effected and looming retrenchments of spouses’ etc, employees are bound to be tempted to extend their fingers where they shouldn’t really be reaching.
The fault can’t be squarely placed on the employees; it’s an issue of controls within the company. Employees spot weaknesses in internal controls of the organisations where they work, over time and often get tempted to exploit them before reporting them to management. Sadly, it’s often the trusted employees who go ahead and commit fraud.
The onus is on management to prevent this from happening:
· Companies should think about more than just payroll and costs when embarking on retrenchments;
· It’s about safe keeping of assets and ensuring these are not abused. fraud does not just mean employees stealing money;
· Management always have to look at what structures have been put in place to prevent fraud.
For small companies that may not afford forensic audits:
1. Make sure there is sufficient segregation of duties;
2. Watch out for any signs of irregularities;
3. Keep your ear to the ground, often other employees know about the fraud scams.
IABC does offer affordable internal audits. – Mwendabai – 011 – 312 3149
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9 Comments
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Mwendabai
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Please go ahead, our research and business news/updates are for public consumption.
Kind regards.
Mwendabai
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