Symptoms of Fraud

Recognizing symptoms of fraud before they develop and infect a company can save businesses and organizations considerable amounts of money. In a previous post, it was noted that fraud is extremely costly. Annually, it is more than a $2.9 trillion cost to organizations worldwide. According to the Association of Certified Fraud Examiners and a 106 nation survey, between January 2008 and December 2009, organizations worldwide lost approximately 5 percent of their annual revenues. Squashing this very costly issue is possible.

 The University of Florida Office of Audit and Compliance Review published several tips for internal controls on their website to help small businesses prevent fraud. If you have not put these systems in place or feel that they are not well enforced you may need to be looking for symptoms of fraud.  UFL published the following symptoms to be wary of:

Fraud is a product of opportunity, pressures, and rationalization. A system of good internal controls will keep opportunities for fraud to a minimum and will, through appropriate documentation and procedures, assist in the identification of a person who commits fraud. The system protects the university’s assets and employees. Fraud symptoms include:

    •  Missing or altered documents to support transactions
    •  Excessive voided documents or transactions without supervisory approval
    •  Transactions with inappropriate authorizations 
    •  Excessive complaints from customers or other employees
    •  Unusual billing addresses or arrangements
    •  Payments based on photocopied invoices or fabricated invoices 
    •  Vendor payments sent to an employees address
    •  An employee who:
      • is living beyond his or her means
      • can’t manage money
      • doesn’t take a vacation
      • is dissatisfied with work
      • is a take charge person
      • has expensive habits
      • has close relationships with customers or vendor

It is important to note that OACR recognizes that these symptoms can exist without the prevalence of fraud; however, it is important to keep them under check. Also, utilizing a system to allow employees to report fraud is essential. It is considered best to allow employees to do this anonymously.

Works Cited

“Fraud Costs Trillions Worldwide.” Industrial Engineer: IE 42.8 (2010): 15. Academic Search Premier. EBSCO. Web. 2 May 2011.


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