Year after year, fraud becomes more prevalent in Canadian workplaces. The
Association of Certified Fraud Examiners Report to the Nations on Occupational
Fraud and Abuse (2012) estimates that a typical organization loses five per cent
of its annual revenues to fraud. In many instances, a company’s employees are the
biggest fraud risks to the business’ bottom line.
Employees may have several key motivators that lead to fraud. The predominant mo-tivators
are financial pressures, addictions, lifestyle demands or other personal problems.
They lead employees to seek additional funds to ease such pressures. To the detriment of
the employer, employees might take opportunities to exploit weaknesses in their employ-er’s
systems and controls to their own personal gain. Whether it is the trusted bookkeeper,
with access to pre-signed cheques or corporate bank accounts, or the salesman with inflat-ed
expense reports, the profile of a fraudster is an ordinary person, often an excellent and
trusted employee.
What can an employer do to address employee fraud? Properly managing the risks in-volves
a three-stage approach: prevention, detection and recovery. To give an employer the
best chance of reducing both the incidence and magnitude of employee fraud, these three
dimensions need to operate in tandem.
THE FRAUD TRIANGLE
Prevention of fraud involves the employer managing what is often referred to as the Fraud
Triangle: pressure, opportunity and tone. The risk of employee fraud is highest when an
employee feels pressure for funds, when the opportunity for fraud exists and when the tone
of the organization allows the employee to justify their fraudulent actions. Conversely, if
the employer tackles each element of the Fraud Triangle, the probability of fraud is signif-icantly
decreased. Therefore, strategies to address each element of the Fraud Triangle are
the most effective way to prevent fraud.
feature
PREVENTING, DETECTING
AND RECOVERING
EMPLOYEE FRAUD
By Jordan Deering
HRPATODAY.CA ❚ MAY/JUNE 2014 ❚ 27