Business Fraud Cases: Find Out if Your Company is a Victim?
You may have appreciated and eulogized Leonardo Di Capri for his role in Catch me if you can, but did you know that his character was based on the real story of Frank William Abagnale, the notorious forger and impostor who mastered the art of passing off bad cheques, the technique he applied to make a sweeping $2.5 million?
Business fraud cases that include business accounting fraud cases, small business fraud cases, business identity theft, business credit card fraud and its very many variations are truly a drain of any nation’s wealth.
Some Famous Business Fraud Cases
Fraud cases associated with big businesses have been exposed time and again with enormous publicity and media coverage. The history of the world is replete with big business scams like the Ponzi scheme, the fraud by Bernard Madoff who cheated more than1300 investors of their life’s savings, the infamous Enron case and the WorldCom scandal.
More recently, the scandal that made headlines was the Indian fourth largest IT company Satyam Computer Services’ scam by its Chairman, Ram lingam Raju. Raju acknowledged that he had inflated the amount of cash on the balance sheet of the company by nearly $1 billion, incurred a liability of $253 million on funds arranged by him personally, and overstated Sat yam’s September 2008 quarterly revenues by 76% and profits by 97%.
But what often are unnoticed are the small business fraud cases. Small Businesses are more vulnerable to fraudulent activity and according to the Occupational Fraud and Abuse report, the loss due to small business fraud cases in the US alone is $400 billion each year.
Understanding Business Fraud
The Association of Certified Fraud Examiners’ defines fraud as "the use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization's resources or assets."
Fraud in Business can be categorized into 3 broad categories of Asset Misappropriation, Corruption and business accounting fraud Cases or fraudulent financial statement cases. Business Accounting Fraud Cases involve methods to misuse or misdirect funds by one or more of the following methods;
- Overstating revenues
- Understating expenses
- Overstating the value of corporate assets or
- Underreporting the existence of liabilities and the like
- Detecting Fraud in your Organization or Company
It is not an easy task to look for signals of fraud in your company. However, if you observe noticeable changes in employee behaviour and performance, then maybe it is time to take on the role of an investigator.
An imbalance in Cash Flows: Signs of fraudulent behaviour can be examined by digging into the company’s paperwork. There are reasons to worry if the financial statements reveal that more cash is flowing out of the company than what is coming in, despite an overall profit in paper. Cash may be needed for company expenditures, yet why is the company poor in cash when the sales are doing well?
If the company is prospering at a time when others are losing out or struggling, then the situation is alarming and needs investigation.
If you do find fraudulent activity going on in your organization, then it is always advisable to employ an expert investigating team to do the job rather than doing it yourself. Although it may cost you a huge amount of money, the professional help and expertise is worthwhile.
