There are definite red flags of fraudulent behavior.
Unfortunately, it is often after the crime has been committed that these warning signs become apparent.
Financial pressure is the biggest motivator of financial fraud by employees, according to the latest report of the Association of Certified Fraud Examiners.
In 81 percent of cases reported to fraud examiners, at least one behavioral red flag was displayed, and in many cases, several were observed.
What are the red flags of employee fraud? Regardless of the year of the study and different groups of perpetrators studied, the behavior displayed remains very consistent.
Percent of cases
1. Living beyond means
2. Financial difficulties
3. Unusually close relationship with vendor/customer
4. Control issues, unwillingness to share duties
5. Divorce/family problems
6. Wheeler-dealer attitude
7. Irritability, suspiciousness, defensiveness
8. Addiction problems
9. Past employment-related problems
10. Complaints about inadequate pay
11. Refusal to take vacations
12. Excessive pressure from within organization
13. Past legal problems
14. Complaints about lack of authority
15. Excessive family/peer pressure for success
16. Instability in life circumstances
Based on the position and level of authority within the company, owners and executives committing fraud are more likely to exhibit a wheeler-dealer attitude, have control issues and an unwillingness to share duties, and feel excessive pressure from within the organization.
Non-managerial employees are much less likely to exhibit these red flags, but are more likely to be motivated by financial difficulties, divorce and family problems, unstable life circumstances and complaints about inadequate pay.
Managers committing fraud are more likely than others to have an unusually close relationship with a vendor or customer, refuse to take vacations, complain about lack of authority and have addiction problems.
The No. 1 red flag for all groups was living beyond their means.
This article was originally posted on June 26, 2014 and the information may no longer be current. For questions, please contact GRF CPAs & Advisors at firstname.lastname@example.org.