Detection and prevention of Occupational Frauds

DETECTION AND PREVENTION OF OCCUPATIONAL FRAUDS
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Detection and prevention of Occupational Frauds
Introduction
Fraud can be simply defined as a manipulative deceitful conduct towards a victim with the aim of making the victim favor the perpetrator. In most cases though not all, the perpetrator will at many of the times have financial gain from the act. Other reasons for the fraud are like the wish to obtain a certain rank or status that will make the individual a bit famous. Fraud is necessitated by lack of effective and proper internal controls which makes it easy for the criminal to make the advances. It is committed by the employees is small corporations while in the case of large ones, the senior management is the one that commits. Even with so many measures put in place to assist in the curbing, fraud still takes place with criminals developing different mechanisms that will assist in the fraud with no notice of the other persons. Processes such as auditing, data mining, risk management and controls, experts in fraud prevention among other measures that are usually instituted to prevent fraud, there are usually loopholes which lead to fraud. The act is usually manipulated by economic greed and needs. It occurs in all types of organizations, be it for profit or non-profit organizations (KPMG, 2009).
Most of the businesses are subject to fraud due to failure to lay down the correct and effective strategies of preventing fraud. The subject was chosen for study so as to asset in exposing individuals to instances of fraud and equipping them with knowledge on matters concerning fraud such as causes, ways of detecting and preventing the crime in many of the organizations and setting. This paper will focus on the causes of fraud, some of instances that provoke fraud so as to assist in laying down strategies that will assist in fraud prevention, fraud investigation techniques that assist in indentifying fraud as well as persecuting the individuals who are guilty the of crimes. The essay will answer the question what are the causes, ways of detecting and preventing fraud? The aim of the essay is to give knowledge on fraud ranging from the introduction and basics concerning fraud, potential causes, ways of detecting and preventing the crime in different settings.
The study will give analysis of different views that were put forward by different scholars on fraud. The scholars` view will serve as some of the causes of crime as the theorists have tried to explain some of the things that prompt individuals to commit crime. Fraud being a crime in one way is therefore well explained by the theorists in attempt to unfold the mystery behind the crime. The paper will also highlight some of the basic types of frauds all in attempt to come up with better explanation on detection and prevention (Andrea & Perreault, 2009).
Definition
In the Canadian constitution, fraud is dealt with by section 380(1) under criminal code of Canada. The section defines the offence as everyone individual who by falsehood, fraudulent or deceit defrauds the private/public property, services, valuable security or money. Such a person is liable to imprisonment or a period of fourteen years or less if the subject matter happens to exceed five thousand dollars (Ulrich, 2009). Fraud happens in case of deliberate denial to an individual through the use of falsehood, deceit or any other fraudulent way and also mental element of subjective knowledge. The value of the actual loss is not actually substantial but the offence is what is of importance. Fraud can be distinguished from theft as it is done through manipulation where as theft is usually forced. Fraud has four main elements: Actus Reas which involves the particular criminal act which involves the dishonesty on the perpetrator and deprivation where the victim was actually denied the access to the important process by the act, Mens Rea that is the guilty mind or criminal intent in the offender which means that the perpetrator had perfect knowledge that what is being done is fraudulent, the victim to whom the offence is done so, it happens due to deception, carelessness and innocence and final element is that the action is usually hidden to ensure that it is not detected. Fraud against the government is provided for by section 121 that states that it is committed by any individual who is holding the office by virtue of employment or contractual relationship. The section further outlines the offences committed by different persons who hold the public office (Ulrich, 2009).
Causes
Academic scholars have also come forward to try and explain the causes of fraud. Edwin Sutherland who was a criminologist is the one who developed the white collar crime. The thinker also has the view that most of the crime is learned from other different sources. The argument here is that crime is not inherent trait from a person but acquired as result of social interaction with criminals. Long relationships has led to a person learning a thing or two concerning crime hence the person puts that learnt knowledge into practice. Such a person learns the criminality techniques, desire, attitude, drive and other criminal ways. The second scholar to explain this was Donald Cressey who was a former student of Sutherland. The theorist developed a fraud triangle with opportunity, pressure and rationalization (Rob Shull, 2003).
The elements aforementioned are the essentials of committing crime. Opportunity being the first one, this is given as the ability of a person to commit the crime without such a person being noticed. This is enabled by poor management oversight, weak internal controls and also there is the influential of a person using the rank in work to execute the fraud. The theorist seeks that this can be limited by effective procedures of operation, policies, controls and also effective processes. The second element is pressure which is the motivation in an individual that prompts such a person to commit crime. The motivators can be like addiction problems, wish to adopt certain lifestyle, personal financial problems that highly affects the person and also substance abuse as well as personal debts that such a person plans to accomplish.
The pressure acts as a challenge to the person which make the person feel embarrassed by the present condition not unless such a person happens to overcome the challenge, the individual will not lead a complete life. This compels the person such that the person has no option. The third element in the scholar`s argument is rationalization. This is the attitude in the person who wants to commit the crime which in this case is fraud that justifies whatever the person is doing. For instance, the individual may feel that in case such a crime is not done, everything will counted as lost, there is no any other alternative that can assist such a person to get out of the situation, justifying oneself that it is a way of borrowing the funds and the person will later will refund, job dissatisfaction where the person can only express the anger by behaving in such a way, in case an organization owes the person that the person feels justifies one self to pay oneself via fraud , the feeling that the organization is making large amount of money and therefore such small amount will not make organization go at loss among other self justification. The scholar provides that internal controls that are effective will assist such a person to eliminate such negative ideas (Rob Shull, 2003).
Steve Albertcht and other colleagues also have tried to explain the concept. These came up with the fraud scale which consist of situational pressures, personal integrity and perceived opportunities. They argued that in the scenarios of situational pressures and perceived opportunities, which are high in this case, the personal integrity happens to go low. When the integrity is low, such an individual may not feel uncomfortable committing and therefore the individual will commit fraud. Fraud is an indicator of low integrity in a person as there is no way a person who has integrity will commit fraud (Rob Shull, 2003). The other scholars were Richard Hollinger and John Park who argued that fraud is as a result of working conditions. This means that if the conditions are not good, the person will commit fraud (Rob Shull, 2003). There was Joseph Wells who related the following factors to fraud: job dissatisfaction, working environment, external economic pressures, formal and informal structures encouraging the fraud behaviors (Joseph, 2004). The above are some of the presumptions that are derived from variety of scholars on the potential causes of fraud. These are vital in assisting the fraud prevention exercise.
Fraud in many of the organizations happens due to economic downturns. When an individual or an organization happens to be in a tight financial situation, the only way out is through frauds. Economic pressures lead to desperation and in such a case, an individual is ready to sacrifice and do anything so as to assist and save the situation at hand. In fact, in such desperate times, that is when it is possible to commit fraud. With poor economic ...