Fighting Frauds and Perpetration of Frauds in Organization - Essay Example

Table of Contents Introduction 2 Frauds 2 Fighting Frauds 3 Preventing Frauds 4 Conducting Fraud Audit 5 Data Driven Fraud Detection 6 Types of Frauds 7 Perpetration of Frauds in Organization 8 Conclusion 9 References 10 Introduction Organization in the competitive world has to continuously deal with frauds. Despite development of strategies which is aimed at reducing the impact of frauds new ways emerge and organization or the society on the whole has to suffer. Different rules and regulations have been developed in this direction and are aimed at reducing the impact but still the world economy continuously faces frauds. This report looks to present the manner in which frauds takes place by concentrating on ways which will lead to a reduction in frauds. The paper looks into the different ways frauds can be reduced if not eliminated and also focuses on the different type of frauds. Along with it emphasis is laid on understanding the manner frauds takes place in an organizational setting and the manner the management has to be prepare itself to deal with those. The overall analysis will thereby help to provide different insights into frauds and will help to understand and find out ways through which it can be reduced in the future. Frauds Fraud is defined as unlawful and intentional misrepresentation of data, facts or any other thing which will have a material influence on other and cause some form of damage. Frauds are conducted with the purpose of ensuring that the other person on which the crime or fraud is inflicted looses either in term of money, health, or any other form. When a fraud is done it results in a change in the behavior of the person who commits the crime and at most times results in the misappropriation of funds. Fighting Frauds Organizations have to develop ethical conduct code and develop an environment where people look to be truthful and work according to the ethical requirements. This on the first instance requires that the organization develops a culture which fosters honesty and being ethical. The organization all around the world has to ensure that a professional code of conduct is developed which looks to ensure that the organization works according to the prescribed rules (Eunson, 2005). This should be clearly explained to the employees during the training program and should be taught the manner in which they need to perform. This will thereby act as a process through which the organization is able to ensure that frauds are dealt in the most effective manner. In case a fraud is conducted it is imperative that the underlying reasons which led to the fraud are identified. The person who is guilty and has committed the fraud needs to be dealt severely. The organization needs to set example and conduct a complete fraud investigation either through an external agency or through someone who will highlight the actual scenario and should not look to conceal matters (Fisher & Lovell, 2006). The approach towards fraud investigation has to be very stringent as it is important that all the sources are verified and the manner in which the different parties have breached the contract is identified. The entire process will be completed when a legal action is taken. The legal action could be either civil or criminal depending on the fraud which has been committed. Since, the trial of frauds are conducted in a court room so the judge based on the severity of the fraud has to judge the fraud either as civil or criminal and has to provide the required punishment to the culprits accordingly. Preventing Frauds Organizations instead of waiting for a fraud to occur have to develop ways through which frauds can be prevented. The most important aspect here is to develop a culture where people remain ethical and work honestly. This can be largely achieved by developing a code of conduct which will help the employees to work according to the predetermined standard so that they are able to achieve the ethical requirements. Having whistle blowers within the organization will largely ensure that the organization doesn’t have to deal with any sort of frauds. The whistle blowers will play their part in the organization and help to inform the management if any such frauds take place within the organization. Further, this will also act as a liaison through which the chances of having frauds are reduced. This will thereby ensure that the organization is able to develop better strategies which will help to reduce the impact of frauds (Cannarella & Piccioni, 2005). The process will further require that the organization develops a process through which employees are monitored. This will help the employees to work according to the prescribed code of conduct and will ensure that the employees don’t take any steps through which hamper the brand image of the organization. In addition to it proper monitoring will help to check the progress and find out the different gaps which could lead to frauds (John, 2010). The organization has to further ensure that the desired punishment is determined for the employees who don’t work according to the required standards which has been determined. This will ensure that the required fear is developed and will make the employees to work according to the ethical code of conduct. Conducting Fraud Audit Organizations have to conduct fraud audit regularly and even after certain time period. The method of audit has to be such that at times surprise checks are made which will help to improve the mechanism of conducting business. The auditing trial period has to look into examining the books of accounts where they look towards matching the different journal entries, ledgers and other expenses document so that the organization is able to understand the manner in which frauds can take place within the organization (Birkman & Peattie, 2008). The organization has to develop the internal control mechanism which looks towards evaluating the different alternatives through which a process is developed to check the frauds. Internal control system will require that the business develops a system through which monitoring is improved (Silva, 2004). Developing a system which helps to strengthen the monitoring mechanism will ensure that the fraud audit trail is improved and will help to ensure better efficiency in carrying out the different functions. The fraud audit has to identify the unusual behavior which is present within the organization. This will help to detect the frauds which will be committed and help to find out the manner in which the behavior of the person is identified. This will also require the development of promoting whistle blower and other methods through which overall efficiency is achieved and the chances of frauds within the organization is reduced. Data Driven Fraud Detection The manner in which frauds are increasingly being used by organization has increased the complexities and requires proper examination of the data so that frauds which are committed through financial records or statements can be identified. This will require development of strategies through which better monitoring is achieved and the entire process of auditing improves. This process will require the preparation of data which has to be analyzed to understand the manner in which the frauds can be created. This will require that the organization looks towards having a mechanism through which a trend analysis is developed so that the overall process through which business efficiency can be improved (Nicholson, 2008). Matching the different expenses with the vouchers and determining the manner in which the different expenses are made will help to improve the relevance of the entire decisions which are taken and will help to reduce frauds. Analyzing the financial statements and looking into different areas through which the financial statements are verified will act as a guide in determining the steps that have to be taken to reduce the chances of misappropriation of funds. This will thereby act as a mechanism through which the business is able to gain efficiency and will be able to reduce the impact of frauds. Types of Frauds Organizations have to deal with different type of frauds which are being committed and need to find out a process through which they are dealt with. This will require the different types of frauds which can take place and is as (Kotler, Bowen & Makens, 2010) Employee Embezzlement: This type of frauds are committed by either a single employee or a group of employee where they look towards concealing different information like using property or products or equipments or something for their own purpose instead for the organization. This will thereby have a negative impact on the organization as it will result in creating complexities within the organization and make the employees use the resources for their own benefit. Vendor Frauds: These frauds are committed by vendors as they provide some substandard materials, or provide some less material or in any other form. The main motive is to inflict loss on the organization and thereby has resulted in creating an instance where frauds are committed within the organization. Customer Frauds: This type of frauds are made by customers where they look towards indulging in activities like defaulting in payments or claiming for some money for some wrong act which hasn’t been committed. This will give rise to customer frauds and result in losses for the organizations Management Frauds: This type of frauds are committed by the management with the purpose of concealing some information so that the person gains and the shareholders losses. This type of frauds can result in loss to the stakeholders and requires to be monitored properly so that it doesn’t impacts the organization. Perpetration of Frauds in Organization There are different reasons which have been identified for frauds and organization has to find out a manner through which it can be reduced. Some of the reasons which have been identified for the purpose of frauds are financial pressure. The need for money to satisfy the requirements makes people commit frauds. This has been matched by a fact that a frauds lead towards another thereby creating a triangle through which different people gets involved and look towards committing fraud. This has an effect on the overall growth of the organization as it leads towards creating an environment where the organization has to continuously deal with the issue (Fritzsche, 2005). This will require that the organization focuses on different details through which the organization is able to monitor frauds and ensure that the impact of frauds is reduced. Conclusion This report thereby shows the manner in which frauds takes place by concentrating on ways which will lead to a reduction in frauds. The paper also highlights the different ways frauds can be reduced if not eliminated and also focuses on the different type of frauds. Along with it emphasis is laid on understanding the manner frauds takes place in an organizational setting and the manner the management has to be prepare itself to deal with those. The overall analysis will thereby help to provide different insights into frauds and will help to understand and find out ways through which it can be reduced in the future. References Birkman, J., & Peattie, K. (2008). Consumer ethics research: Reframing the debate about consumption for good. Journal of Business Ethics and Organizational Studies, 13(1), 22-31. Cannarella, C., & Piccioni, V. (2005). Public organizations and local rural development: An empirical analysis, Journal of Business Ethics and Organizational Studies, 10 (2), 16-23. Eunson, B. (2005). Communicating in the 21st century. Melbourne: Wiley. Fritzsche, D. (2005). Business ethics: A global and managerial perspective. New York: McGraw Hill. Fisher, C., & Lovell, A. (2006). Business ethics and values: Individual, corporate and international perspectives (2nd ed.). Harlow UK: Prentice Hall. Hill, C. & Jones, T. (2002). Stakeholder Agency Theory. Journal of Management Studies, 24 (2), 191-205 John, P. (2010). The 'Big Five' factor taxonomy: Dimensions of personality in the natural language and in questionnaires. In L. A. Pervin (ed.), Handbook of Personality Psychology: 66-100. New York: Guilford Kotler, P, Bowen, J & Makens, J (2010). Marketing for hospitality and tourism, 5th edition, Prentice-Hall, Upper Saddle River NJ, USA. Nicholson, M. (2008). Applying Agency Theory and the concept of corporate governance. Retrieved on April 21, 2013 from http://www.lotsofessays.com/viewpaper/1706098.html Silva, M. (2004). Corporate Governance in a turbulent world. Retrieved on April 21, 2013 from http://www.allbusiness.com/business-planning/business-structures-incorporation/866368-1.html Read More