Home Accounting and Auditing Here’s three simple ways to detect occupational fraud

Here’s three simple ways to detect occupational fraud


Dawn Brolin, writing in Accountingweb, says US businesses lost over $7 billion dollars due to fraud in 2017, and that figure will likely grow in 2018.

Those who commit fraud are those embedded in the company. You’d never suspect Betty, the payroll officer, who has been with the company for 20 years. Brolin says you should work with people you trust, but that does not mean you shouldn’t pay attention. Has Betty had a sudden lifestyle change? A few extra overseas holidays? Did she get an expensive new car?

“Trusting those who work with you and for you is important, but I would follow that up with the fact that you need to do more than that. Verifying that things are in order including timesheets, payroll taxes, accounts receivable, accounts payable, and more is critical to all businesses.

Occupational Fraud is broken into three categories:

  • Asset Misappropriation (the most common)
  • Corruption
  • Financial Statement Fraud.

Let’s look at two examples of occupational fraud and how you can help you and your clients from this common, but avoidable, crime.

1. Time Stealing: Let’s take a look at an employer with five employees, each of which overstates their daily time by 15 minutes. We will also assume they each make fourteen dollars and hour for this example.

If you multiply the impact of the gross wages plus the payroll taxes, the amount of money stolen due to time stealing would be approximately a $5,000 loss. If we use the same assumptions, but increase the hourly rate to $22 an hour, the approximate loss would be $8,000.

I don’t know about you, but I can tell you I would rather keep that money in my business or put it in my pocket!

SOLUTION: I highly recommend having your clients use TSheets by QuickBooks.

2. Payroll Tax Fraud: Do you have clients who handle their payroll internally? Does the employee who prepares the payroll ever take a vacation? Have you seen the payroll preparer have an unexplained lifestyle change? These are simple questions that can lead to payroll tax fraud.

The most frustrating thing about this one is that it is 100 percent avoidable. Utilizing a full service payroll company is more critical now than ever before. It takes an estimated 36 months to detect a payroll tax fraud and on average will cost the employer hundreds of thousands of dollars.

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