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A Comprehensive Look at Fraud Identification and Prevention by James R. Youngblood

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11
Chapter 2
Employee Theft and Fraud
2.1 Introduction
Employee theft and fraud are present in almost every business, and the individuals
involved can range from the fast food counterperson to the chief executive officer
(CEO) of a major corporation. Many times, the theft is generated by opportunity
because of a weakness in operating procedures. Other times, the individual obtains
the position for the purpose of committing fraud. Either way, the organization
needs to ensure there are sound operating policies for daily business activities and
work to make sure only quality applicants are hired and retained.
With a majority of employee fraud, the activity takes place based on an oppor-
tunity presented in the daily operation of a business. Based on the nature of the
business and the internal operating and stang policies, the defined opportunity
can vary. What needs to be understood on the part of owners and managers of a
business is that the fraud opportunity created can be based on what is internally
perceived as a cost- saving measure.
To cut corners, a business might reduce the number of employees to lower the
annual payroll expense. If the additional duties created by lowering employee levels
can be added to the duties of the remaining staff and daily operations remain at the
current pace, this decision might sound like a quality cost- saving move, taking on
the term of “doing more with less.
Many times, doing more with less can lead to a lower employee head count and
lower operating profit. On the surface, a business can look at lowering employee
payroll expenses as a cost- saving measure, one that can add to the bottom line. If
the cost- saving analysis stops with cutting stang levels, the business operation
could be creating fraud- related opportunities.

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