Essay on Fraud Identification And Classification Of Business Management

Essay on Fraud Identification And Classification Of Business Management

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Fraud Identification and Classification
Identifying fraud and understanding the difference between fraud and errors or omissions is an important aspect of business management. Evaluate the case of an employee of Company XYZ who is traveling for business in a city where the employee has extended family. In the evenings, the employee invites his family to dinner and charges the entire cost of the meal to his company credit card. He then subsequently files an expense report for these meals. The meals were not overly extravagant expenditures and thus are “lost” in the overall expense report. The employee considers this to be insignificant. Does this inclusion of these meals constitute fraud? This is where it becomes important for a manager or a co-worker to be able to identify fraud and to understand the difference between fraud and errors or omissions.
Fraud can be defined formally in many different ways. However, the most common accepted definition is that fraud is an intentional representation of a material item that is false and a deception that is believed, acted upon, and causes damage (Albrecht, Albrecht, Albrecht & Zimbelman, 2012). When considering the definition of fraud with above case of the inclusion of meals that are not for the employee, the employee is committing fraud. He knowingly misrepresented numbers and facts on an employee reimbursement plan. The employee would argue that the overall affect was minimal to the company and therefore justified. However, the fraudulent expense reports do cause damage to the company even in small amounts.
Fraud is very costly to an organization and it has a direct impact on the net income of a company. It is estimated that fraud has a “dollar-to-dollar” impact to an o...

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... it. Concerns for organizations are that fraud continues to rise despite the rules of Sarbanes-Oxley that have sought to detect fraud. As well, motivations of employees to commit fraud have continues and the methods of committing fraud have not materially changed either (Forbes, 2006). Companies must diligently work within their organizations to create a culture of honesty and deter fraud.
An employee that intentionally misrepresents information on their expense reports if committing fraud within their organization. An organization should have clear and concise procedures and policies so that employees and co-workers know how to report and deal with internal or external fraud that they become aware of. A company should make fraud detection a priority by instilling internal controls in order to avoid this very costly expense to their organization.

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