Common Types of Occupational Fraud You Should Know

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Dealing with occupational fraud is an unavoidable part of having a business. It can come in the form of financial statement fraud, corruption, or misappropriation of assets. If you own or manage a company, you should do all that is necessary to protect yourself and your business from occupational fraud.

What is Occupational Fraud?

Occupational fraud is also called internal fraud, employee fraud, or workplace fraud. It is a broad term that pertains to any fraud that happens in the work setting.

Do you know that there are other common types of occupational fraud besides employees stealing money? Stealing money, supplies, or hours, as an employee, owner, or executive falls under the most common one called misappropriation of assets. Understanding the types of fraud is key to protecting one’s business and preventing more occurrences. This action should start from the top going down to employees. Everyone who is part of a company should understand the consequences of fraud in the workplace so that they can work together in minimizing fraud.

Below are the common types of occupational fraud.

Corruption

Corruption accounts for 40% of reported occupational fraud cases in Canada. In corruption, an executive, employee, or owner abuses his or her position for personal gain. It can go hand in hand with both financial statement fraud and misappropriation of assets.

Examples of corruption include:

  • Product substitution, using counterfeit or cheaper product with lower quality and pocketing the difference in cost
  • Creating false health insurance claims with the help of a health care provider
  • Conniving with a vendor to make create payments for services or goods that were never rendered
  • Kickbacks from business deals
  • Bribery by using company or business funds to benefit another person or company in the name of personal gain

Financial Statement Fraud

Financial statement fraud makes 14% of reported cases of occupational fraud in Canada. It is a type of workplace fraud wherein employee alters cash flow statements or balance sheets to manipulate people’s perception upon seeing them. Motivations for financial statement fraud may range from wanting to keep the business afloat, attain loans for the business, or personal gain and may occur together with corruption and misappropriation of assets.

Examples of financial statement fraud include:

  • Exaggerating the value of an asset
  • Making false sales records
  • Making present earnings seem higher by not reporting expenses until later

Misappropriation of Assets

Misappropriation of assets is the most common type of occupational fraud in Canada and the world. In misappropriation of assets, any member of a company uses his position to steal anything of value.

Examples of misappropriation of assets include:

  • False expense reports
  • Cheque tampering and forgery
  • Submitting false sales to collect a commission on said sales
  • Tampered time sheets
  • Using company vehicles or machine for personal use
  • Abusing company credit card by charging personal expenses on it
  • Theft of intellectual property, services, time, supplies, or cash
  • Paying false vendors as part of purchase order schemes

Protect Your Business from Fraud

The effects of small-time fraud can accumulate into huge loses for a business. Some businesses lose a significant chunk of money to fraud and end up closing down. It is important for everyone to understand that fraud can cost everyone their livelihood. If you need help protecting your business from fraud, do not hesitate to contact us at Haywood Hunt. We’ll be happy to discuss with you how our private investigation services can help you to uncover fraud as well as minimize its occurrence in your organization.

 

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