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Fraud In The Workplace

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managing business cash flow

Why do we have a fascination with white-collar crime?

Media and TV entertainment producers have devoted countless hours to storylines that portray fraud in the workplace. For example, Perry Mason, Arrest, Trial, and Law & Order; never fulfill our appetite for white crime storylines.

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What intrigues us is the reason for the crime. For example, what compels the senior-level manager, the low-level employee, or the longtime middle manager to ultimately risk everything, convinced that their crimes will go undetected.

In the real world, the characters in popular fiction are frequently motivated by financial needs caused by avarice, debts, business reversals, poor investments, or trying to maintain a lifestyle well beyond their means.

In a time of massive Ponzi schemes like the notorious Bernie Maddoff, and burgeoning white-collar crime, one can understand why fraud is not uncommon in the business world.

In fact, employee fraud costs businesses billions of dollars each year in the US it’s $50 billion annually.


Employee fraud is not going away. It’s widespread and comes in all sizes, significantly impacting a company’s productivity and profitability. The fraud reasons are not always evident to the business owner or even their attorneys. However, it is often overlooked, ignored, and even undetected.

The current statistics for fraud in the workplace is staggering (source: ACFE Report to the Nations):

  • The typical organization loses 5% of revenue due to occupational fraud;
  • The median loss per case was $160,000, and it took an average of 18 months for it to be uncovered;
  • Fraud is much more likely to be detected by tips, than by any other means;
  • Smaller companies are disproportionately victimized by fraud, as they usually lack a sufficient level of checks and balances;
  • Fraud is more likely to be committed by a single individual without a prior history of fraud, who often raises a red flag because they live beyond their means and are experiencing financial difficulties.

To better understand why these statistics are so alarming, one should be familiar with the three categories of fraud; Management Fraud, Employee Fraud, and External Fraud.


Management Fraud often involves intentional misrepresentation of financial statements, theft, or improper use of company resources.

Employee Fraud involves a non-senior employee theft or improper use of company resources. Lastly, External Fraud is the theft or improper use of resources by people who are neither management nor employees.

Identifying Fraud

So how do you know when an employee or worker has gone rogue? Let’s look at some of the warning signs of fraud in the workplace:

  • Accounting Anomalies
  • Internal Control Symptoms,
  • Analytical Symptoms,
  • Lifestyle Symptoms
  • Behavioral Symptoms

Warning signs

The prevalent warning signs of fraud may include accounting record discrepancies, unusual transactions, and conflicting or missing evidential/supporting documentation. If a business has not been producing the profits it anticipated, it might be advisable to conduct a fraud audit sooner rather than later. One can draw a direct connection between unexpectedly lower revenues (or business losses) and possible fraud patterns.

Privacy and Confidentiality

It is imperative to maintain strict confidentiality regarding such matters. Businesses fail to retain counsel when fraud is uncovered or suspected and/or do not engage the services of independent fraud investigators or a forensic team. If criminal or civil charges are pursued, an independent forensic accounting firm may be necessary.

Employee fraud and stealing from the company are commonplace everywhere, not just in the USA. While more than 99% of your employees and workers are honest, a few are always looking for ways to get something for nothing. Your role is to ensure your business has the suitable mechanisms and systems to ward off and prevent opportunistic and planned attacks on your company.

Engage accounting, technology, and legal forensic experts to regularly assess your systems and look for anomalies that may signify criminal activity.

Want to read more – how secure is your workplace?

See these tips on workplace security.