Employee fraud – red flag

Employees accused of fraud are often victims of circumstance, particularly where a company has few or no internal controls.

Typically, the suspect or defendant has been appointed to perform an administrative role that started with non-financial tasks but through pressure or other employees’ absence has developed into entering data on an accounting system. Very often it is women who find themselves in this situation and they become ‘Girl Fridays’- people who can put their hand to any back office job. They rarely receive formal training in any element of their role. They are usually poorly paid – at or around minimum wage. If a woman can type she can do the payroll and enter up invoices on a system. Or so the thinking goes.

Sometimes this happens because the employer doesn’t know any better and in any event is far too busy getting the work in and doing it. Other times however it can be a deliberate strategy to employ someone who is unqualified and not up to the task. This enables blame to be assigned when, for example, financial irregularities are discovered on HMRC compliance visits.

So when fraud occurs or is alleged, the finger is generally pointed at the person who has been maintaining the books and payroll. The person who has never had any formal training for the work he/she does. The poorly paid person who has the opportunity and would clearly have a motive. But it can be symptomatic of a wider issue. A lack of internal financial controls generally means that other people in a business have an opportunity to defraud it as well. Including its owners. From inflated travel expenses to fake or altered purchase invoices.

Careful examination of evidence in employee fraud cases often reveals another picture from the one painted by the prosecution. Just be aware.