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    High Cost of Theft and Fraud: Student's Name Institution Course Name Instructor's Name Date

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    Fraud and theft cost businesses up to 5% of their annual revenue. Small businesses are especially vulnerable as they often lack systems to prevent, detect, and recover from fraudulent incidents. Employees are frequently involved in fraud through misappropriation of assets. Implementing internal controls like separation of duties, redundancy, and centralized processes can help reduce fraud and increase profits. The 2016 ACFE Global Fraud Study found that small businesses often experience employee theft and fraud due to misplaced trust in employees and a lack of basic accounting controls. Establishing a code of conduct can help define inappropriate behaviors and consequences to discourage fraud.

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    High Cost of Theft and Fraud: Student's Name Institution Course Name Instructor's Name Date

    Uploaded by

    topnerd writer
    112 views4 pages
    Fraud and theft cost businesses up to 5% of their annual revenue. Small businesses are especially vulnerable as they often lack systems to prevent, detect, and recover from fraudulent incidents. Employees are frequently involved in fraud through misappropriation of assets. Implementing internal controls like separation of duties, redundancy, and centralized processes can help reduce fraud and increase profits. The 2016 ACFE Global Fraud Study found that small businesses often experience employee theft and fraud due to misplaced trust in employees and a lack of basic accounting controls. Establishing a code of conduct can help define inappropriate behaviors and consequences to discourage fraud.

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    Theft and Fraud

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    Fraud and theft cost businesses up to 5% of their annual revenue. Small businesses are especially vulnerable as they often lack systems to prevent, detect, and recover from fraudulent incidents. Employees are frequently involved in fraud through misappropriation of assets. Implementing internal controls like separation of duties, redundancy, and centralized processes can help reduce fraud and increase profits. The 2016 ACFE Global Fraud Study found that small businesses often experience employee theft and fraud due to misplaced trust in employees and a lack of basic accounting controls. Establishing a code of conduct can help define inappropriate behaviors and consequences to discourage fraud.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    112 views4 pages

    High Cost of Theft and Fraud: Student's Name Institution Course Name Instructor's Name Date

    Uploaded by

    topnerd writer
    Fraud and theft cost businesses up to 5% of their annual revenue. Small businesses are especially vulnerable as they often lack systems to prevent, detect, and recover from fraudulent incidents. Employees are frequently involved in fraud through misappropriation of assets. Implementing internal controls like separation of duties, redundancy, and centralized processes can help reduce fraud and increase profits. The 2016 ACFE Global Fraud Study found that small businesses often experience employee theft and fraud due to misplaced trust in employees and a lack of basic accounting controls. Establishing a code of conduct can help define inappropriate behaviors and consequences to discourage fraud.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    1

    High Cost Of Theft And Fraud

    Student's Name

    Institution

    Course Name

    Instructor's Name

    Date
    2

    High Cost Of Theft And Fraud

    Fraud is an event that may affect any business organization. Whereas not all fraud is

    exposed in a business, detected fraud consume up to 5% of a business’s revenue. Small business

    organizations are more exposed to fraud because they lack systems and policies to prevent,

    detect, and recover fraudulent incidents (Hutton, 2019). Employees are the most involved in

    fraudulent activities, this involvement can take the shape of different types of malpractices, the

    most common type of malpractice is a misappropriation of assets. Internal control strategies such

    as separation of duties, redundancy, and centralized processes, when properly implemented, can

    increase profits in a business enterprise by reducing fraud and theft. (Molungu, 2019). When

    implemented, internal controls discourage employees from committing fraudulent activities by

    ensuring there is direct control to catch errors. An internal control such as redundancy will

    ensure the requirement of additional evaluations before performing transactions. Centralized

    processes implement monitoring and tracking mechanisms, therefore, discouraging fraud.

    Separation of duties is the process where each employee is assigned a respective task, this

    reduces the chance of fraud because each employee will have a hand in one specific task only

    making it easy to track down an issue.

    The ACFE “2016 Global Fraud Study” reported two key causes for some small

    businesses experiencing cases of employee theft and fraud. These two reasons are a higher

    degree of misplaced or assumed trust and lack of basic accounting controls (Bunn, Ethridge &

    Crow, 2019). In most small business enterprises, multiple functions, e.g., financial transactions

    are handled by a single employee. These individual employees control it all, making it easy for
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    fraudulent activities easier to go undetected. The management relies on one person to makes

    deposits, control the books, and perform other business functions. Much trust is placed on one

    person such that if they get involved in fraudulent acts it won't be noticed. Small business

    organizations are especially susceptible to fraud because they lack basic accounting controls, are

    less likely to be audited, and tend to have a high level of trust for their employees. Lack of strong

    internal financial controls makes it easy for fraudulent activities to happen. Unlike larger

    business firms, small businesses lack hotlines for customers, suppliers, and employees to report

    observed instances of theft and fraud.

    A code of conduct lists a set of rules, norms, practices, and responsibilities that govern an

    organization. A business must have a code of conduct document that defines all fraudulent

    behaviour, and what are the repercussions of committing those acts. A code of conduct makes

    employees understand why certain practices are inappropriate and the reasons why a business

    organization expect good behavioural performance (Ivancevich & Konopaske, 2013). It is

    difficult for any business organization to maintain ethical rules. Many businesses have several

    layers of management, therefore creating a strong ethical rules policy is necessary since not all

    people possess good business morals. Choosing to do the right can be expensive for some firms,

    but the payoff is maintaining consumer value through maintaining the firm’s code of ethics. A

    business should have a code of ethics handbook in place that sets out rules and expectation

    against fraudulent activities for employees to understand the steps that will be taken when such

    behaviours occur, this protects the organization from litigation processes.


    4

    References

    Bunn, E., Ethridge, J., & Crow, K. (2019). Fraud in small businesses: A preliminary study.

    Hutton, L. W. (2019). Understanding the Effects of Internal Controls on Veteran-Owned Small

    Businesses in Virginia (Doctoral dissertation, Capella University).

    Ivancevich, J., & Konopaske, R. (2013).Human Resource Management, 12thEdition.McGraw-

    Hill Irwin

    Molungu, T. N. (2019). Internal Control Strategies to Mitigate Fraud in Small Manufacturing

    Businesses in Cameroon.

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