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The 3 Most Common Types of Employee Fraud

Posted on November 8, 2013 by Mintzer Law

Recruiting honest and reliable employees is one of the more difficult aspects of business ownership and management. Employee fraud can really hurt the bottom line of any business or organization. According to the Association of Certified Fraud Examiners, occupational fraud and abuse is a significant problem for U.S. businesses. Professional forensic investigators report that the average business loses five percent of annual revenue to theft in the workplace and other forms of fraudulent offenses.

Types of Occupational Fraud

Preventing costly employee fraud has become a high priority for businesses in the United States. The average business loses $150,000 to fraudulent activities every year. Large corporations lose millions of dollars in annual profits to financial scams. The three most common forms of workplace fraud are described below.

  • Monetary theft: Stealing cash is the most obvious form of workplace crime. If an employee is provided with an opportunity to help themselves to a handful of company cash before it’s deposited, the bottom line of a business is at risk. In the absence of comprehensive internal controls, funds that are skimmed off the top are never recorded and difficult to detect. Employees have even been known to pocket money by making cash disbursements to fictional vendors. It’s especially difficult for small businesses to establish internal controls to detect employee theft. Ideally, a single employee should never be responsible for receiving, counting and depositing company funds. The reconciliation of company revenue should occur on a consistent basis. If caught, a worker who steals from his employer may face severe penalties for embezzlement.
  • Physical theft: Stealing company inventory and supplies can cost a business dearly. Restricting access to valuable merchandise, avoiding excessive inventory levels and performing regular checks of item stocks are strategies that many corporations use to reduce the occurrence of merchandise thievery. Comparing sales trends to item depletion levels also proves to be useful.
  • Workers compensation falsification: Lying about an on-the-job injury is a costly crime that can send a company’s workers compensation rates through the roof. In an effort to combat this expanding issue, many employers are growing wary of any injuries that aren’t witnessed by other workers. Injury reports that occur just prior to a layoff, termination or strike are often scrutinized carefully.

If you would like to hear more about the types of fraud crimes that are perpetrated in a work environment, call 713-862-8880 to talk to Houston attorney Rand Mintzer.