Types of Fraud In Business Explained

Payroll Fraud is the theft of money through the company’s payroll system. This often consists of an employee, or employer, boosting the amount they should be paid on the payroll system. Or through ‘Ghost Employee Fraud’ of which a fake employee is created in order to send money to.

This is when a financial statement is deliberately over, or understated, in order to conceal the true financial health of the company. This is another type of payroll fraud and can potentially lead to wrong business decisions, leading investors to lose out on their money.

Asset misappropriation is when the individuals that are entrusted with managing a company’s assets take advantage of this position and steal money. It is often also referred to as ‘Insider Fraud’ or as a type of employee fraud.

Tax fraud can be defined as when any individual knowingly falsifies information on a tax return in order to limit the amount of tax they are required to pay to the government. Tax evasion is one of the most common types of fraud; in businesses, this is done by falsifying statements to to limit the amount of income tax.

This refers to the stealing of ideas, content or personal information from a person or company. When a data leak occurs in a company, individuals can be put at risk of identity theft through their compromised information.

Bribery and corruption are when a person in power commits a crime by offering a financial reward, with the intent of fraudulent activity being committed in return.

This is a type of financial statement fraud, of which money is taken off the top of the bank statements of a business each day and a lower daily total is reported, creating fraudulent invoices.

Insurance fraud is when a company, or employee, stage a theft or exaggerates a claim to gain compensation from a bank or insurance company; this is then directed to the company payroll account, or the employer’s personal account.

Business fraud can affect the integrity of your companies’ security system. By doing so, it puts your company reputation at risk, as customers are less likely to trust your brand. Over time, this can cause a reduction in new customers, as well as previous ones, as they may choose to use an alternative company.

If the fraud was committed by an individual high up in the company, it is likely that employees will be less trusting of the business owner. This in turn, reduces company morale and can subsequently affect day-t0-day productivity. Additionally, employees may feel guilty that they did not detect any financial crime, affecting the company culture as a whole.

If employees cannot trust their employers, then they are likely to find a company that they can trust. If business fraud is detected, and found to have a large impact on the company, it is likely that employees may begin to look for jobs elsewhere.