Running a business demands a high level of trust between the employing organization and the employees. In some organizations, the staff has access to a wide range of valuables, and they will get tempted to steal. Be it inventory, cash deposits, or any bank info. The organization must ensure that it hires well-trusted employees.

When a staff of an organization steals from the company, it is occupational fraud. Even though it may be unlikely that a worker will be involved in theft, just one situation will lead to disastrous results.


The Association of Certified Fraud Examiners (ACFE), defines occupational fraud as “the use of a person’s occupation for self-enrichment through deliberate misappropriation and misuse of the employing organization’s asset and resources.”

Every year, AFCE confirmed that organizations run at a loss of about 5% of their revenues to occupational fraud, which is way more than the fraud prevention would cost.


Occupational fraud is of three types; Asset misappropriation, corruption, and financial statement fraud.

Asset Misappropriation:

A recent study ascertained that of the three major occupational fraud divisions, asset misappropriation is the most common, with an occurrence percentage of over 89% of the studied cases. However, compared to the others, the median loss is about $114,00, which is the least costly.

Asset misappropriation occurs when an employee is involved in the theft or misuse of the organization’s assets and resources by stealing cash, billing, or presenting hiked reports of expenses.


In cases of corruption, the senior management staff is usually most guilty. Over sixty percent of corruption cases have people in positions of authority as perpetrators.

This type of occupational fraud refers to an employee’s involvement in the misuse or abuse of his influence in business transactions to obtain a benefit or any type of bribery. This corrupt act has caused a median loss of about $250,000 to victim organizations.

Financial Statement Fraud:

Financial Statement fraud is the least common but most costly type of occupational fraud. It involves an overstatement of assets, profits, revenues, and an understatement of losses, expenses, and liabilities. However, the aim of the manipulation may require action in the opposing direction.

Financial statement fraud means deliberately manipulating the representation of an organization’s financial status through the intentional omission or misstatement of amounts in the financial statement in the bid to deceive the receivers or users of the financial statement. The median loss of financial statement fraud is around $800,000.


There two major costs of being a fraud victim. The financial cost as well as the cost to the reputation of the organization. On a financial basis, every case of fraud sets an organization back with about $120,000 and about $147,000 for organizations with less than 100 employees. Also, many fraud cases are not reported so as not to taint the organization’s reputation.

On the aspect of the organization’s reputation, the damage is unquantifiable. The moment fraud occurs, the damage to the organization is instant, and the results, devastating. If occupational fraud occurs in a non-profit organization, the stakeholders will certainly lose trust in the organization. As a result, the yearly donations and memberships will drop.

The inability to take measures of occupational fraud prevention will increase the risks of fraud and the price the organization will have to pay.


Every business owner needs to put measures in place to combat occupational fraud. Here are some tips for making sure that your staff does not have the chance to conduct fraudulent activities in your organization.

Be Proactive:

Considering the enormous financial consequences of occupational fraud on a business, being proactive is a necessity. Do not wait until the deed is done to develop strategies. It does no matter how long your employees have been with your organization, and it is not too late to develop anti-fraud plans and strategies. The earlier the protection systems are implemented, the better.

Create an Accountability System:

Notwithstanding the size of the business, it is important to set up systems for accountability. In smaller organizations, employees are assigned to check each other’s work to ensure accountability. One individual will not be assigned to a task without proper documentation and supervising processes.

Be Conscious of High-Risk Positions:

When setting up an anti-fraud plan, the focus should be on employees who have a higher chance of occupational fraud. Most especially, staff in departments prone to fraud like management, accounting, sales, etc. This is because they are at the forefront of invoices, payments, and other items of value.

It is also important to begin your fraud prevention plan from the top because it is easier to get everyone else to comply after the executives and management.

Conduct Audits Regularly:

In occupational fraud, a thorough company audit can detect any problem. Regular audits help to assess the company by third parties who will remain impartial while spotting errors.

Fraud Training:

Employees may notice possible fraud loops but may be too timid to report, or they may be completely unaware of the act being fraudulent. Therefore, it is important to set up fraud training to acquaint them with fraudulent acts and behaviors, as well as tips to report suspected cases, for instance, through the filing of anonymous tips or reports.


Overall, occupational fraud can be prevented when proactive measures are put in place to ensure accountability and loyalty of all staff members and organizations. You can also hire the services of an expert accountant to guard your resources. Otherwise, without proper anti-fraud plans, the organization is prone to theft and other fraudulent acts that can cause setbacks for the organization, both in the organization’s finances and reputation.