This research paper looks into fraud risk management and the types of business fraud. Fraud prevention is the first line of defense in minimizing fraud risk. Prevention is cost-effective because it poses barriers to fraud, deters fraud, and can eliminate the need for costly investigations. Today, numerous organizations have fraud risk management systems. An example is the Internal Control-Integrated Framework by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). These systems combine various fraud prevention strategies in a continuous process with close monitoring. Fraud preventive controls include human resource procedures like anti-fraud training. They also include IT and operational controls like the segregation of duties.
fraud risk management and the types of business fraud
UNDERSTANDING THE TYPES OF BUSINESS FRAUD
Some of the types of business fraud include asset misappropriation, authorized maker, forged checks, billing, and cash larceny. Asset misappropriation occurs when someone steals funds from his employer. It is the most common type of business fraud. An authorized maker is a person with the power to create and sign checks for a company. Here, the person creates a check payable to himself, or one that pays his expenses. In this case, an effective fraud prevention strategy would be to have someone else handle the company’s bank statements. Forged, altered, and concealed checks also create a lot of business fraud. Therefore, as part of fraud risk management systems, organizations should ensure the checks do not fall into the wrong hands.
understanding the types of business fraud
PRINCIPLES AND STRATEGIES OF FRAUD PREVENTION
Companies use fraud prevention strategies and principles like fraud risk governance, fraud risk assessment, fraud prevention, and monitoring and reporting. The function of fraud risk management should be the core of an organization. Thus, to ensure its effectiveness, there should be aspects of fraud risk governance in written policies, defined responsibilities, and on-going procedures. Structured risk assessments form the foundation for the prevention and detection of fraud. Additionally, these assessments work to address the actual risks faced by the organization. From here, organizations develop the most effective fraud prevention strategies to counter the risk. Lastly, the goal of risk assessments is to determine the type, likelihood, and potential cost of any type of business fraud.
principles and strategies of fraud prevention
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