Three Things You Should Know About Fraud
- Nov 13, 2023
What is fraud?
Why do people commit fraud?
- Pressure is what motivates an individual to perpetrate fraud. This is often financial pressure such as mounting bills, drug problems, or gambling debt. Pressure could also come from a need to meet certain organizational goals and targets or a simple desire for status symbols such as an expensive house, car, or other assets.
- Opportunity is a method by which the individual will defraud the organization. In this stage, an employee sees a way to abuse their position of trust for financial or personal gain. The decision to commit fraud is usually connected with a low perceived risk of getting caught. While organizations cannot always control the pressures their employees experience, they can limit employees’ opportunity to commit fraud through the establishment of effective anti-fraud controls.
- Rationalization is the final stage in a fraud triangle where a fraudster goes through the process of justifying the crime in a way that makes it acceptable of justifiable act based on their morals. Fraud acts are often rationalized based on external factors such as a need to pay medical bills or take care of family.
What are the most common red flags?
- Living beyond their means
- Financial difficulties
- Unusually close association with a vendor or customer
- Excessive control issues or unwillingness to share duties
- Irritability, suspiciousness, or defensiveness
- Bullying or intimidation
- Recent divorce or family problems
- A general “wheeler-dealer” attitude involving shrewd or unscrupulous behavior
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Louise Gannuch is a Partner in the firm and has 15 years of experience in the accounting industry.
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