On the road to success, companies face numerous risks, be they economic, regulatory, technology, supply chain, as well as fraud risks. Despite the great advance in the implementation of Governance practices, organizations still suffer consequences from fraudulent administrations.

Occupational fraud, for example, is defined as the use of a profession for personal enrichment through the misuse or misapplication of the employing company's resources. Their types have been consolidated into three main categories:

Misappropriation of assets

Occurs when an employee steals or uses misuse an organization's resources. It can include stealing money, stealing inventories, overestimating expense reports, creating fictitious suppliers, and perpetuating payroll and collections schemes.


It usually involves an employee improperly using his or her influence to obtain a direct or indirect benefit. It also consists of conflicts of interest, bribery and kickbacks.

Fraud in financial statements

It is the manipulation of an organization's records or financial information. It's done for a variety of reasons, like inflating stock prices or helping people get performance metrics in exchange for bonuses.

There are actions an organization can take to prevent occurrences of occupational fraud and mitigate the impact if and when fraud is discovered. Here are some:

  • Lead by example;
  • Be aware of fraud warning signs. This may include circumvention of existing policies and procedures, as well as changes in the behavioral characteristics of those with financial duties, responsibilities, and custody of the organization's assets and financial systems;
  • Have a written code of ethics and ensure it is known to employees and included in appropriate training;
  • Have an anonymous fraud reporting channel;
  • Conduct a periodic risk assessment and develop a plan to allocate the necessary resources for effective implementation;
  • Develop a plan to review, test and update systems and controls;
  • Internal audit;
  • External audit (independent audit);

Supplier fraud consists of schemes in which a company's accounts payable and other payment systems are manipulated for illegal personal gain. Common vendor fraud schemes fall into three categories:

billing schemes

This is where an employee creates false documentation to manipulate a company's billing system and generate a false payment for their own benefit.

Banking fraud schemes

An employee handles banking transactions so that they can be deposited into a bank account under his control. They often involve falsifying, altering beneficiary information, or issuing manual and inappropriate checks.

Bribery / Extortion

An employee receives or demands inappropriate personal payments from a supplier for which he obtains a sale or other financial advantage.

There are actions an organization can take to prevent supplier fraud from occurring and to mitigate the impact if and when fraud is discovered. Here are some:

  • Employ due diligence in the supplier setup process;
  • Create systems and controls for the segregation of duties;
  • Have a clear system of policies and procedures for those responsible for the supplier's setup and payment process;
  • Internal audit;
  • External audit (independent audit);

Finally, the Payroll fraud is a form of asset misappropriation that involves stealing money through a company's payroll processing system. Common payroll fraud schemes include:

ghost employees

EIt involves creating a fake employee in the company's payroll system. Large companies become more susceptible to this as the number of employees increases, because the tracking fee becomes more voluminous.


This scheme involves an employee agreement that fraudulently creates a time clock, allowing a missing person to receive their pay without being physically present and performing their work tasks.

Change in payment rate

Employees of a company who conspire with the payroll department and/or system to adjust their salaries. This type of fraud is more likely in a small company due to a lower amount of controls and segregation between work.

There are actions an organization can take to prevent payroll fraud occurrences and mitigate the impact if and when fraud is discovered. Here are some:

  • Conduct a periodic audit of payroll reports;
  • Install a camera to monitor the time clock. Advanced technology can be used to uniquely identify employees, such as fingerprints or retinal scans;
  • Separate duties and controls. Allow only a few people to process payroll and then different employees to record it;
  • Internal audit;
  • External audit (independent audit);

Understanding how, where, why and by whom fraud is practiced is part of the process of good Corporate Governance and is essential to preserve the survival of the organization, regardless of its size and revenue.

It can be challenging to eliminate all instances of fraud from an organization. But with the right procedures, training and awareness, your impact can be significantly reduced.

Get in touch with TATICCA – ALLINIAL GLOBAL, which provides integrated auditing, accounting, tax, corporate financefinancial advisorrisk advisory, technology, business consulting and training. For more information, access or e-mail Our company has professionals with extensive experience in the market and has certified methodologies for carrying out activities.