Signs That Fraud Is Occurring in Your Company (The People)

If one of your employees was ripping off your company, would you see the warning signs? Would you be aware of the things that might point to a fraud-in-progress? Or would you be like most owners and executives: blissfully unaware that anything unusual is happening?

Many owners and executives fall victim to their own sense of trust. We want to believe that people are honest, and that our employees would never steal from us. We want to think that we have things under control, and we’d know if any money was missing.

But the truth is that fraud is happening under the nose of owners and executives each day, to the tune of about 5% of revenue. That level of fraud could easily put a company out of business if a fraud scheme is successful in occurring for a year or more.

The first step to stopping employee theft is being aware of some of the warning signs as they pertain to the employees themselves. I’m talking about things like sudden unexplained affluence… the new Harley Davidson, the luxury vehicle, the new jewelry… all purchased by an employee who doesn’t have a pay level that justifies such extravagances.

Behavioral changes are also worrisome, and can often be the result of someone with a guilty conscience. They can also be a sign of someone trying to cover their tracks… think coming in early before everyone else is there, being overly possessive of documents or assigned tasks, being unwilling to train anyone else to do job duties, acting strangely when anyone is a position to see the work being done. All of these point to “I have something to hide,” and should merit additional scrutiny for the employee.

Up next: Operational signs that fraud is occurring.


Tracy L. Coenen, CPA, MBA, CFE performs performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.