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23 September 2019

Getting to grips with business fraud

Forward Thinking Business Blog –

All businesses are vulnerable to fraud. While online and email-enabled frauds are the ones we hear most about these days, internal fraud is arguably a more serious business issue because it affects every business at some stage.

Losses from the misappropriation of company assets, theft of company data, payroll and procurement fraud can all go unnoticed where there are weaknesses in an organisation’s internal control systems.

Our PKF colleagues, PKF Littlejohn, in their Annual Fraud Indicator 2016 provide an insight into procurement fraud. This type of fraud is estimated to cost £127 billion in the UK.

“The procurement of goods and services often accounts for a significant slice of an organisation’s expenditure and is open to a wide range of potential risks of fraud. This is because there are usually multiple individuals involved in a process who often do not work closely together, i.e. the person who wants something purchased does not always work directly with the people who initiate orders and with those responsible for paying.”

Payroll fraud can also prove costly. This type of fraud arises where for example fictitious employees are included on the payroll or unauthorised hours billed. Losses from payroll fraud were an estimated £12 billion in the UK, PKF Littlejohn reported.

‘The best way to prevent business fraud is to implement strong internal controls’, writes Feargal McCormack.

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How to deter fraud

Steps that businesses can take to deter potential fraudsters include implementing robust procedures. For example, these might include strengthening your procedures for the authorisation of expense claims, carrying out daily or weekly bank reconciliations, separating of duties so that where an employee places an order, the order is approved by someone else, and so on.

It is important to take time to think about where the fraud opportunities in your business are. Assess the risks and consider what improvements you may need to implement in your systems.

If you suspect fraud is occurring, it’s a good idea to get professional advice as the way that you deal with the situation can affect your ability to recover losses.

For further information on these issues…

Contact Feargal

Feargal McCormack / Managing Director

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