Although descriptions may vary, there are three basic types of company fraud.
1. Asset Misappropriation.
The most common form of employee fraud, asset misappropriation can include theft of funds, inventory theft, payroll fraud, or theft of services among others.
2. Bribery & Corruption.
A subject which has become daily news in South Africa, the most common cases of bribery and corruption include schemes such as kickbacks, shell company schemes, bribes to influence decision-making, manipulation of contracts, or product substitution with inferior goods.
3. Financial Statement Fraud.
Possibly the least common form of fraud but the reputational, legal and punitive costs of financial statement fraud comes at a steep price for executives, directors, employees and shareholders. One thinks of manipulation of the share price or company value, awarding unrealistic bonuses, favourable loan terms, or various indirect benefits gained.
MUBESKO AFRICA’s Smartryk Calitz, head of Forensic Examinations, says that the harsh economic climate has significantly increased the risk of fraud at both employee and company level. Employees are finding it difficult to cope with the rise of basic living costs while company executives are under pressure to show sound financials to their bankers, funders and investors.
“The current economic environment presents the perfect storm for a significant rise in company fraud, aggravated by opportunities presented by growing digitisation and staff layoffs opening gaps in controls. The cost of fraud is punishingly high and it is worth having a fraud risk assessment done to ‘red flag’ opportunities for fraud and recommend controls to close gaps identified.”