Lakeland College

Signs of internal fraud
Posted on 10/29/2012 2:32:36 PM

Peter Goldmann, Editor, White Collar crime fighter wrote “The Six Signs of Internal Fraud”. It was published on http://accounting.smartpros.com/x59050.xml September 2007. According to the article, Steven Albrecht, associate dean of Brigham Young University’s Marriot School of Management at the 18^th annual ACFE fraud conference, there are six signs of fraud in all organizations. Below are the six signs in detail.

1.     Accounting Anomalies: this includes countless red flags such as inventory shortages, unrecorded transactions, unusual levels of return etc.

2.     Internal control weaknesses: internal control weakness usually creates opportunity to insiders to commit fraud. Usually, when weaknesses are identified, chances are that they have already been exploited.

3.     Analytical symptoms: this states that when a business function occurs at the wrong time, or is conducted by the wrong person, chances are that fraud will or has occurred.

4.     Lifestyle symptoms: usually, when you have employees living beyond their means, it is a sign that some kind of fraud is going on. Some “smart” internal fraudsters will save the money stolen, but most of them start living extravagant lifestyles.

5.     Behavioral symptoms: when you have employees who no longer look you in the eye, sweat more than usual, come in earlier than usual and leave later than usual, you should monitor them. They could be potential fraudsters.

6.     Tips and complaints: when employees report either actual or suspected incidents of fraud among bosses or co-workers, it is a wise thing to look into it, and find more evidence of fraud if any.

I believe that these tips if followed will help reduce the amount of fraud going on in companies. I noticed that these signs are not hard to reach. By putting the right measures in place and being a little more vigilant, fraud can be detected and prevented greatly.