Typical organizations averaged a loss of 5% of their annual revenues to fraud! This information is from the recent 2010 Report to the Nations on Occupational Fraud. Fraud is something that can occur in any company or organization. According to The Corporate Fraud Handbook, 4 elements must be present for fraud to exist:
- A material false statement.
- Knowledge that the statement was false when uttered.
- reliance on the false statement by the victim
- Damages as a result.
These elements must exist whether the offense is civil or criminal. Fraud is an intentional act. There is no such thing as a fraud “accident.” It is something that is hidden and done over time.
If fraud is ever suspected in your organization, you would contact a fraud professional such as a fraud examiner or forensic accountant to investigate the allegation. As a fraud examiner, the first thing that I will determine is whether there is proper predication, which is the circumstances that would lead a trained fraud professional to believe fraud has occurred. I must also note here that fraud is determined by the courts and no one else. Law enforcement, as well as fraud examiners, and forensic accountants may investigate fraud, however, the court has the final say. That is the case whether it is a criminal or civil offense.
When proper predication does exist, I then proceed in gathering evidence to resolve the allegation from inception to deposition. I then begin to gather evidence such as, recording statements, writing my report, and being prepared to testifying in court to my findings. When conducting fraud examinations reverse proof must be conducted to ensure that no other plausible explanation exists other than fraud.
When you suspect the occurrence of fraud in your organization, contact a fraud professional who will assist you determine which steps to take next.
Kenneth Hunt MBA, CFE
Kenneth Hunt's Blog 