Occupational Fraud: Detection

Occupational Fraud: Detection

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Occupational Fraud: Detection

Occupational Fraud

Occupational Fraud is a type of frauds inside organizations which are committed by employees against the employers or business owners. In other words, occupational fraud is the fraud that is perpetrated by employees or an employee of an organization against his or her organization. Occupational fraud is the usage of someone else occupation for the personal enhancement in the organization through a deliberate misapplication or misuse of employing the assets and resources of the organization. According to (Association of Certified Fraud Examiners, 2019), occupational frauds specifically include misuse of assets and asset misappropriations, corruption, and fraudulent financial and business reporting.

Manners in which Occupational Fraud can be detected

There are a number of techniques or manners in which the occupational frauds may be detected in the organization. But, some of the most crucial and most appropriate manners/methods are described below;

Establishing Fraud Policies and Procedures

Occupational frauds are those which cannot be detected simply through external or internal audit, while they need specific steps to be taken to detect them. For detecting occupational frauds in an effective way, implementation of well-documented fraud policies and procedures is one of the best manners. It is a highly appropriate manner/methods because ensures that every person in the organization knows what to and how to act when an illicit act has been uncovered (Justice, Cohen, & Hermanson, 2018).

Hotline Implementation

The most common and highly useful method for occupational fraud detection in the implementation of a Hotline where tips are taken from others in the organization. By implementing a Hotline employees would be able to call in incognito. According to (Justice, Cohen, & Hermanson, 2018), organizations or businesses that implement the method of hotline experienced frauds which are 42% less costly.

Involving Information technology

Information technology is the only source and method that can detect those happenings which are out of humans’ control or not detectable by employers and top management. By implementing Information technology, the data can be protected from any inside attacks by employees who use it for their own benefits and empowerments (Davis, 2019). As well as by getting IT involved, the attacks on important data can also be protected while finding out the attackers.

Internal Auditing

Internal auditing is the process which is concerned with the identification of all frauds in organizations such as financial frauds or frauds in financial statements and occupational frauds. Internal auditing is the second most common method that discovers occupational frauds in the organization through the development of systems and activities that indicate frauds (Justice, Cohen, & Hermanson, 2018). This also partially includes management review to detect occupational frauds happen inside an organization.

Looking for Red Flags

Looking for red Flags is an appropriate manner to detect occupational frauds. In this method, the organizations look for and should look for some behavioral traits which could be identified as red flags. For instance, if an employee lives beyond his/her financial level or has close relationships with customers or vendors, it can be meant that the employee behaves fraudulently (Davis, 2019). Hence, training key employees and managers for detecting these types of flags/sign is also a fine method to detect occupational frauds.

Factors that Determine the Effectiveness and Efficiency of Fraud Detection Manners

The number of factors exists that determine the effectiveness and efficiency of manners that detect frauds in organizations but the most crucial ones are as follows.

Performance Enhancement

The above-listed manners would be considered highly effective and efficient when a clear improvement in organizational performance have been witnesses without any changes in the existing practices and organizational processes (Karim, & Siegel, 2008).

Identification of Hidden Patterns

The manners of fraud detection are considered effective and efficient if new patterns, trends, and processes have been identified in the organization (Karim, & Siegel, 2008). The patterns, trends, and processes which were hidden before.

References

Davis, M. V. (2019). Strategies to Prevent and Detect Occupational Fraud in Small Retail Businesses.

Justice, S. E., Cohen, J. R., & Hermanson, D. R. (2018). Star Employee Occupational Fraud: Treatment and Subsequent Effects. Journal of Forensic and Inverstigative Accounting, 10(3), 294.

Karim, K., & Siegel, P., (2008). An Analysis of Efficiency and Effectiveness of Auditing to Detect Management Fraud: A Signal Detection Theory Approach. Managerial Auditing Journal. 13. 367-375. 10.1108/02686909810222384.