Tips to Identify and Mitigate Occupational Fraud

November 11, 2022

By Hubert Klein and Jessica Vrooman

During National Fraud Week, the third week of November, EisnerAmper takes a look at several types of common business-related fraud and offers preventative tips. 

Occupational fraud is a type of fraud that an employee commits that somehow utilizes his or her role or employment status for personal gain. There are three primary categories of occupational fraud: 

  • Asset Misappropriation – This is when an employee steals or misuses an organization’s resources. It can include theft of petty cash, stealing inventory, overstating expense reports, creating fictitious vendors, and perpetrating payroll and billing schemes. 
  • Corruption – This generally involves an employee who misuses his or her influence to gain a direct or indirect benefit. It also consists of conflicts of interest, bribery and kickbacks.
  • Financial Statement Fraud – This is the manipulation of the financial records or information of an organization. It is done for many reasons such as to inflate stock prices or help people attain performance metrics for bonuses. 

There are things an organization can do both to prevent occurrences of occupational fraud and mitigate the impact if and when fraud is discovered. Here are several:

  • Set the proper tone at the top for an organization. The key is to lead by example.
  • Keep an eye open for fraud warning signs. These can include the circumvention of existing policies and procedures as well as changes in the behavioral characteristics of those with financial duties, responsibilities and custody of organizational assets and financial systems.
  • Have a written code of ethics. Make sure this is known to employees and included in the appropriate employee training.
  • Have an anonymous fraud reporting process and/or tip hotline.
  • Perform a periodic risk assessment and develop a plan and allocate necessary resources for effective implementation.
  • Develop a plan to review, test and update systems and controls. 

It may be challenging to eliminate all instances of occupational fraud at an organization. But with the proper procedures, training and awareness, you can significantly mitigate its impact. 

This article is part of EisnerAmper’s Fraud Week Series. For more information on fraud awareness week, visit https://www.eisneramper.com/fraud-awareness


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About Hubert Klein

Hubert Klein a Partner, the Firmwide Valuation Services Leader, and the New Jersey Forensic, Litigation & Valuation Services (“FLVS”) Market Leader, is a nationally recognized expert witness and professional educator in forensic accounting, damages, and valuation topics.