How to Catch Employees Stealing: Data Analysis
Have you ever wondered if your employees are stealing from your company? Did you wonder how they did it and how they concealed it? Do you sometimes wish you were a fly on the wall so you could hear the discussions that led to a group theft? Do you think hidden cameras are an option to catch employees in the act of stealing? Have you wondered how much personal business and trash-talking occurs via company email and web surfing?
The sad fact is that employees steal from their employers all the time. Even those who we think are generally honest can end up pilfering company funds. The schemes range from small things like the theft of office supplies and doing personal tasks on company time, all the way to outright theft of money or fudging financial reports to get a higher bonus.
Management is often willing to overlook small lapses in judgment and honest. But everyone has their limits and companies need to be aware of what their employees are doing on company time and on the company dime.
Technology can make analysis of employee activities much easier. Does this sound like “Big Brother” to you? Maybe so, but it doesn’t have be so ominous in practice. Monitoring employees is attractive: Companies that actively monitor employees generally have a lower level of fraud. Technology gives management options that are now cost-effective, and just the knowledge that the company is watching employees' activities can deter would-be thieves. If the company is actively on the look-out for bad behavior, an employee is less likely to be unethical at work.
One option for monitoring the workplace is data analysis. Cross-checking computer data can yield interesting results. Management selects measures that are important to monitor, and the software is set up accordingly.
For example, a company may want to cross-check vendor addresses with employee addresses to see if there may be payments to fake vendors which were sent to an employee’s home. The software could also be set up to look for post office boxes or mail-drop addresses that don’t match the address in a vendor’s master file, which could also be an indicator of a fraudulent payment sent to someone other than the real vendor.
Other risks can be identified by cross-checking vendor names, looking for similar or related names. Employees sometimes duplicate a vendor in the accounting system, using a small variation or misspelling in the name so that it unique to the computer software but hopefully not noticed by other employees. The fake vendor will likely sail past a supervisor who will probably recognize the name as a known vendor. One a check is signed, the dishonest employee may be free to take the check to the duplicate vendor and cash it for her or his own benefit.
Computer software can be set up to monitor the accounting system for unusual data or unusual access. Items of interest might include a high level of activity for new vendors, or levels of activity for established vendors that are out-of-line with recent history.
Companies can also keep tabs on an unusual number of transactions, or transactions entered at unusual times of the day or night. Software can monitor the amounts of checks, looking for repeated amounts or checks written for amounts that fall just
below a company’s threshold for additional authorization. The company
may also be interested in manually-prepared checks or checks written out-of-sequence.
It’s easy to see how simple analysis of everyday data in a company can lead to the discovery of a fraud in progress.
Up next: Monitoring Activities of Employees
