Organizational fraud and abuse account for five percent of a company’s gross revenues. The effect of occupational fraud and abuse on a company is an increase in costs, a reduction in potential raises, and a reduction in profits. Occupational fraud is categorized as asset misappropriations, fraudulent statements, and corruption. Corruption includes change from positive morals and principles to bad. The potential corruption schemes a company should be aware of are bribery, illegal gratuities, economic extortion, and conflicts of interest.
Bribery is an offering to have an act completed. Kickbacks is an example of a bribery scheme. To solicit business, a vendor may win a contract by paying the contracted company employee to enter into a business relationship. The relationship between the employee and vendor usually already have a collusive relationship. “ As with any form of billing fraud, kickback schemes have the potential to create budget overruns, either because of overcharges or excessive quantities purchased, or both.
Actual expenditures should be compared to budgeted amounts and to prior years, with follow-up for significant deviations” (Wells, 2011, 246).
The Essay on Insurance Fraud Company Million
Insurance fraud - whether committed by sophisticated criminals, otherwise honest consumers, or by insurance company employees and owners - is an increasingly expensive burden on the U. S. economy, taking money out of the pockets of all citizens. This illegal activity diverts vital resources away from businesses, law enforcement, the civil justice system, regulatory agencies and local emergency ...
Illegal gratuities are used to influence decisions like bribery. Examples of this type of corruption are accepting large gifts in exchange for business deals. Economic extortion is much like a bribery scheme but instead of a vendor bribing an employee; the employee is bribing the vendor.
Conflicts of interest “occurs when an employee, manager, or executive has an undisclosed economic or personal interest in a transaction that adversely affects the company” (Wells, 2011, 255).
Along with corruption schemes, fraud can lead to negative effects on a company. Fraud can occur through creative accounting. creative accounting practices are through big bath charges, creative acquisition accounting, cookie jar reserves, materiality, errors, and revenue recognition.
The Securities and Exchange Commission (SEC) is a U.S. governmental oversight to ensure compliance and protect against creative accounting fraud. This type of fraud can delist a company through the SEC effecting shareholders and share prices. When fraud is suspected and detected, evidence is gathered by a fraud auditor in the investigation. “The quantity and quality of evidence must convince an honest and reasonable citizen that the defendant is guilty after it is all considered and weighed impartially” (Singleton & Singleton, 2010, 213).
Evidence needs to be relevant, material, and competent. The evidence may be relevant to the investigation but not material and unnecessary. The evidence must also be sufficient and credible. “Any fraud investigation has the potential to end up in court in either a civil or criminal court case. Therefore it is important for fraud investigators, forensic accountants, fraud auditors, and even managers to know the facts about the legal rules for evidence in order to be successful in court” (Singleton & Singleton, 2010, 223).
