One aspect of the accountancy profession is forensic accounting. A business loses on average the equivalent of around 7% of its annual turnover to fraud, so it is clear to see how essential forensic accounting is.
How do you react upon discovering that you have become the victim of fraud? Most people experience shock, humiliation and anger and it is natural that the owners and managers of a business will feel the same. Business depends on trust, and when that trust is found to be abused, it becomes personal. One of the main causes of fraud is the complacency often shown by victims and the realisation of this can be very frustrating.
Giving vent to negative emotions may make an individual feel better in the short term, but is it likely to produce the best results for a business as it seeks to recover its losses, and recover from the damage that the fraud may have done?
Surely it would be better to have a game plan in place to deal with the aftermath of a fraud? A “fraud response plan” is not just a bureaucratic exercise that only large companies or public organisations can afford. It is a plan that can prevent you from throwing “good money after bad”. It’s bad enough that you may have suffered financial loss to the fraudster. Worse if you compound your misery by committing to professional costs without recovering at least as much value.
You need to consider what arrangements might be required to keep the cost of fraud to a minimum. Questions to ask may include:
- Do you have staff policies in place that will enable you to investigate records held on computers or company mobile telephones? (If you allow staff to use their own computers on company business, you may find it difficult to gain access to those records in the event of an investigation).
- Do you know what rights your employees will have, in the event that they come under suspicion? (Make sure that you understand the necessary procedures for the suspension of suspects, or at least that you have the telephone number of an insurer or advisor who can give you advice when the occasion arises. Few things are more annoying than receiving a claim for wrongful dismissal from an employee who is suspected of having stolen from his or her employer).
At its simplest, your fraud response plan might consist of a list of telephone numbers which should include your employment advisor, a specialist legal advisor and your accountant, preferably a forensic accountant. Having a fraud response plan is also the first step when implementing an effective fraud prevention policy within an organisation.
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