A 2017 Senate inquiry discovered that more than 50% of Australian businesses have experienced white-collar crime in the past two years, and over a third of these organisations have lost more than $1 million.

It is impossible to identify exactly how much fraud goes unreported or undetected, although a global study on fraud believed a median estimate was that fraud costs organisations around 5 per cent of their revenue each year. 

Many businesses that are currently preoccupied with the impact the covid-19 pandemic is having on their business may currently have taken their eye off the ball when it comes to monitoring fraud. This might even more so be the case if an organisation has a large number of their employees working from home.  

Today’s business world is very different to what it was in a world prior to the internet and even more so with the era of covid-19. Nowadays businesses have to deal with threats such as fraud, money laundering and corruption, which carry the potential for significant reputational, criminal and financial damage. Under normal circumstances, market disruption, widespread layoffs, and economic uncertainty tend to correlate with increased fraud and legal action and the commensurate business for accountants that specialise in legal calculations. 

Forensic accounting has evolved as the business world has progressed and changed, both domestically and internationally. In a world before covid-19, the majority for a forensic investigator included fraud related to employees, account takeovers, bookkeeping, credit and securities.  

In a post covid-19 world, more unusual cases are occurring more frequently. For example; criminals have been selling bogus cheques on the dark web, sometimes redepositing the cheques three or four times. Situations such as these are very challenging because such threats are very new, and are happening in huge numbers. 

The role of forensic accountant

Some of the major responsibilities of a forensic accountant is to analyse and prepare financial information for a court of law. It’s a job that requires a mixture of accounting, auditing and investigative skills. Accountants working in this field will generally need to be engaged to review financial records and information in a post-acquisition dispute calculations bankruptcy and economic damages. Business valuations, insolvency and fraud issues also often require the skills of a forensic accountant.

There are many challenges forensic accountants face because they often have to follow long and winding paths through financial records, they may find that pools of money travel through various departments, entities and companies.

Following these trails requires interviewing many different types of people, which range from other accountants, COEs and managers. It is challenging knowing who is the appropriate people to interview and that interview needs to be conducted in a way which makes it possible for the accountant to solve the cave, recover money or reveal fraud.

The dangers of being too trusting

It has been reported that giving employees training on fraud related issues has the potential to reduce the median loss of fraud by 23 percent. The same report indicated that as a result of the training fraud can be detected 33 percent faster. Having a lack of internal controls was the main weakness that contributed to occupational fraud in 25 per cent of cases listed in this report. 

It is not uncommon for fraud to occur in a business where there is an overly-trusting environment, which is something many small business fosters within their workplace. Although sharing the login details for the accounting system could seem harmless it does have the potential to cause damage if specific information is shared with too many people.

The most common types of fraud

Cyber fraud – when criminals use malicious software to send phishing emails that contain false, duplicate or inflated invoices with the intent to defraud. Cyber fraud can also include hackers who send fraudulent emails pretending to be the CEO to a member of staff requesting for them to make a bank transfer.

Fake invoicing – business owners must have basic oversight over every vendor in their business because false invoicing is an increasingly popular fraud method. It is often committed by an employee, supplier, contractor or external fraudster. 

Mandate fraud – when fraudsters pose as legitimate suppliers and advise changes to existing payment measures. The person committing the fraud tricks staff into changing a direct debit, standing order or bank transfer payment from an organisation or person the company makes frequent payments to. 

Payroll fraud – the occurrence of payroll fraud is twice as common in small businesses (fewer than 100 employees) than larger ones. A classic example is “ghost employees” when a fake or ex-employee remains on the payroll and is still continues to receive a wage. 

Cash theft – stealing cash through skimming (cash that hasn’t been reported into the accounting system but taken by an employee), larceny (cash that has been reported that has been taken) or fraudulent disbursement (releases of funds which have not been authorised by the owner). 

Post Author: Craig Dangar

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