Occupational Fraud and Abuse. Corporate Fraud. Internal Fraud. Employee Fraud. Employee Theft. Embezzlement.

Occupational fraud and abuse goes by many other names, including internal fraud, internal fraud, employee fraud, employee theft, and embezzlement. The phrases "occupational fraud" or "internal fraud" are often preferable when discussing corporate fraud, because they apply to a range of employee misconduct while the other terms are a bit more restrictive.

In lay person's terms, occupational fraud is something that
 Violates a person's fiduciary duties to the organization.
 Is done in secret and concealed.
 Is done for a direct or indirect benefit to the perpetrator.
 Costs the employer assets, revenue, or opportunities.

Legally speaking, fraud is generally defined as an intentionally false representation about a material point, which causes a victim to suffer harm. Essentially, when someone purposely lies about an important fact and someone else loses money because of that lie, a fraud has been committed. Most of the instances of fraud are fairly straightforward to prove. After all, it's usually pretty clear when something is false, and whether it was material and there was a loss to a victim.

People often wonder why so much fraud occurs and why it is not caught sooner, thereby limiting the losses. The answer is simple. Companies have systems in place to help ensure that accounting transactions are recorded accurately and that proper procedures are followed. Companies have policies to guide the behavior of people who would generally strive to act in an ethical manner, but occasionally need rules to dictate their behavior. Those systems, procedures, and policies often work to catch errors and honest mistakes in the accounting process.

However, when an employee is committing fraud, he or she is deliberately trying to thwart those systems and policies. The person is purposely circumventing the system, while at the same time attempting to conceal his or her actions. While systems, policies, and procedures may be reasonably good at bringing errors to light, they typically cannot and do not expose fraud. Fraud constitutes a purposeful disregard for the system and a deliberate attempt to violate that system for personal gain, and most companies' systems aren't designed to stop this.

There are also the companies that have inadequate or nonexistent systems to ensure accurate accounting records and financial statements. Those companies can barely keep adequate and reliable records, even with honest employees. But if they can't even ensure a basic level of accuracy, management will hardly be able to prevent, detect, and stop fraud from within.

Internal fraud itself is troubling. Companies entrust their employees with assets, information, and customers. Business cannot be done unless companies put trust in people to sell their products or services, deliver them, collect the money, and keep accurate records. Employees must be charged with growing and managing the business, as well as doing what is in the best interest of the owners and the rest of the company When those trusted people steal, it can be disheartening. Maybe even more troubling is the fact that so little of the proceeds of fraud are ever recovered. Studies show, close to half of internal fraud victims cannot count on recovering any of the proceeds of fraud, and another one-fourth will recover only a fraction of what was stolen. Clearly, companies cannot and should not expect to recover fraud proceeds.

Occupational Fraud and Abuse. Corporate Fraud. Internal Fraud. Employee Fraud. Employee Theft. Embezzlement.