The primary reason for investigating an employee fraud is to determine exactly who was involved, how much was stolen, and how it was done. An important secondary reason to investigate an internal fraud is to look for ways to improve the company’s fraud prevention controls.
A third, and often forgotten, reason to investigate fraud within a company is to deter employees from committing fraud in the future. The fact is that when employees are aware that management takes fraud seriously, they are less likely to engagement in theft and embezzlement.
Investigation of internal fraud can deter employees from committing future frauds because:
- It lets employees know that management is monitoring the company, its systems and its employees.
- It demonstrates that management is intent on finding out who is responsible for fraud.
- It is a public display of the company’s commitment to stopping fraud.
For this technique to work in terms of deterring future frauds, it’s important for the company to be thorough in its investigation and follow through on the results. A complete investigation must be done so that all perpetrators are identified. Management must then take disciplinary action against those involved.
Following through with consequences demonstrates again that a company takes fraud prevention and detection seriously, thereby preventing employees from engaging in fraud in the future.