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Protect Your Business From Occupational Fraud

Protect Your Business From Occupational Fraud


Know the red flags of occupational fraud to protect your business

Source: CPA Canada
Author: Daphne Gordon

Employee misconduct is a challenge for small businesses. Do you know how to detect cons on the inside?

Small businesses in Canada are disproportionately affected by fraud committed by their own employees, according to a survey of certified fraud examiners.

The Canadian edition of Report to the Nations: 2018 Global Study on Occupational Fraud and Abuse by the Association of Certified Fraud Examiners (ACFE) looked at 82 cases of occupational fraud perpetrated against organizations in Canada between January 2016 and October 2017.

According to the ACFE study, occupational fraud—more commonly known as employee fraud—is committed against the organization by its own officers, directors or employees and is likely the largest and most prevalent threat to businesses. (See Understanding the 3 types of occupational fraud to know what it looks like.)

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Understanding the 3 types of occupational fraud

Source:  CPA Canada
Author: Daphne Gordon

Misappropriation of assets, corruption and financial statement fraud all fall under the same umbrella. Here’s how business owners can protect themselves.

Occupational fraud—also known as workplace fraud, internal fraud or employee fraud—falls into three general categories: misappropriation of assets, corruption and financial statement fraud.

Understanding the types of fraud and educating employees about them can help business owners protect themselves, says fraud-prevention expert Jennifer Fiddian-Green, CPA, CMA, a partner and forensic accountant at Grant Thornton LLP.

1. MISAPPROPRIATION OF ASSETS

The most common form of fraud is misappropriation of assets, in which an employee, executive or owner of a company uses his or her position to steal from an organization.

2. CORRUPTION

Of the reported cases of occupational fraud in Canada, 40 per cent involved corruption, in which an owner, executive or employee abuses his or her power to subvert the decision-making process for personal or company gain.

3. FINANCIAL STATEMENT FRAUD

Of the reported cases of occupational fraud in Canada, 14 per cent involved financial statement fraud, in which an employee alters balance sheets, income statements or cash flow statements with the intention to deceive people who read them.

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