Corporate Fraud and Employee Theft: Impacts and Costs on Business
INTRODUCTIONUnfortunately, corporate fraud and employee theft within businesses today are not uncommon circumstances. These activities can create far reaching impacts and effects on the business and have substantial impacts on the cost performance metrics of the business and the overall morale of the employee workforce. These affected businesses can carry the weight of the "bad decisions" and unethical practices of a few associates for many years. A person can barely go a day without hearing or reading a news article that describes some type of activity that occurred by a business or its associate that questions one's ethical behavior practices. There are varying statistics of the costs that business bear due to employee theft and fraud, but in 2014, the amount ranged from $20 to $50 billion dollars (Foley, 2014) The cost, however, goes well beyond the total dollar value of the fraud or theft activity. The impact is also felt on overall company morale, especially the team morale of the involved associate. Activities such as these also cause other business and suppliers to question the practices of the "injured" company as well. Questions are raised about the ethical behaviors of the business as a whole. Only time and consistent performance and results can improve and remove the tarnish from the reputation of the affected company or business.There are many types of corporate and employee fraud that affect business of all sizes and all types. The fraud and theft can come in many forms actual theft of cash, property, or other assets; procurement or contractual fraud; payroll theft; and misrepresentations of financial statements are just a few. No business is one hundred percent immune to having a circumstance occur in their business. Even businesses that have the most "impactful" and detailed ethics statements and detailed procedures and segregations can still be a victim. Companies send employees through training sessions that discuss ethical decision making and practices that employees should not engage in while conducting business; however, these occurrences still happen.A business must ensure that it has practices in place that can help prevent, or at the least, identify the issue very quickly to prevent larger impact to the organization. Segregation of duties where there are financial transactions and audit checks to verify processes are just a few ways that an organization can help to prevent fraud and theft. Also, simple employee behaviors and actions can also be indicators of concern living well above their means and wanting access to management systems or details that do not relate directly to their role are a few examples. The instances that allow a person to consider and actually participate in fraudulent and theft practices are sometimes so innocent in the beginning. This requires that employers and businesses keep a watchful eye on areas where there is opportunity for one to be involved in such activity. This report will provide more examples of fraud and employee theft activities within the business world over the last several years and will look into the business culture and structure that allows for the employee behaviors. The paper will provide the impact costs to business both direct and indirect costs. The paper will also provide actions or changes that a business can take to prevent fraud and employee theft.LITERATURE REVIEWCorporate fraud and employee theft are not new to this day and age. However, the rates seem to have become more staggering over the last several years. Back in 2007, it was estimated that theft and fraud by a business's own employees cost businesses $100 billion dollars worldwide each year (Sauser, 2007) Another article shows that in 2010 the magnitude of fraud and theft on businesses worldwide could be as large as $2.9 trillion dollars (Davis, 2013) In 2013, the number of cases of employee fraud and theft that exceeded $100,000 for each case grew at a record pace of almost five percent (2013: Highest Rate)