Preventing Fraud in Organizations: Options for Security Managers
Fraud is a costly problem for business organizations all over theworld that has proliferated greatly in recent years due to increase in theuse of computers and online e-commerce by businesses. The extent of theproblem is reflected in an alarming estimate by the Association ofCertified Fraud Examiners (ACFE)[1] according to which fraud cost $600billion (or about $4,500 per employee) to US companies in one year (2001)alone. (Quoted by Thomas and Gibson, 2003). Fraud[2], in general, refers towhite-collar crimes that illegally deprive individuals or organizations ofmoney or kind. However, for the purposes of this essay, only the followingthree types of fraud shall be dealt with: The main purpose of this essay is to discuss the options available toSecurity Managers while attempting to protect their organizations from thethreat of fraud. However, the essay also explores the major causes of suchfrauds and the ways in which they are perpetrated so that solutions for theproblem become self-evident. In addition computer-related fraud and itsprevention is dealt with separately as it poses a unique security hazard
(Wells, 2001) We can, therefore, conclude from the above that opportunity andmotivation are mainly responsible for employee fraud[5] and, conversely,these two factors have to be tackled if employee fraud is to be controlledeffectively. Division of responsibilities,[8] job rotations and mandatoryvacations, however, cannot ensure complete protection from employee fraudand the Security Manager has to devise a number of more sophisticated'control functions' to minimize such opportunities. For example, "smart cards"(credit cards with embedded customer information) were unsuccessful becauseof their high cost and the requirement of a smart card reader at either endof transaction. Employee Theft and Fraud The United States Dept. Why Employees Commit Fraud' Human greed is generally considered to be the basic reason behindemployee theft and fraud. Management Fraud Although there is some grey area between 'Management Fraud'[10] and'Employee Fraud,' management fraud generally refers to the tempering in thecompany's financial statements by the top management (e. This can be done byposting the number of days without an employee theft incidence-similar tothe common practice of posting the number of days without a work-relatedaccident. This seems to indicate that theeffectiveness of control measures by the security managers and internalauditors is severely restricted and does not cover 'management fraud. (Middleton, 1999) It is possible to do so by adopting "healthy" securitypractices. It is important for the SecurityManager to remember that such "neural networks" need continual updating tocapture the new fraud trends.
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Acceptance Essays
