Chris King, a partner in Audit and Assurance with mid-tier chartered accounting firm HLB Mann Judd Brisbane, says up to 50 per cent of businesses are affected by fraud, while only 10 per cent are aware of it.

 

With the new financial year upon us and businesses focusing on ways to maximise their bottom line, the investment in measures to mitigate fraud risk is even more important for SME's.

Fraud is still one of the biggest threats to SME's, with Queensland businesses the most affected in Australia*.

The frightening statistic is that up to 50 per cent of businesses are affected by fraud and only 10 per cent are aware of it.

While every business understands the importance of focusing time and money on strategies to minimise tax, they should also be looking at systems to avoid fraud.
 
Fraud comes in all shapes and sizes, from stealing a ream of paper to millions of dollars in cash or stock.

It also affects businesses of all sizes and in all sectors, and businesses undergoing change - whether that be growing or downsizing - are most at risk.

For SME's with poor internal controls, fraud can present a major threat, which often goes undetected, with an average of only five per cent of perpetrators caught.

And while many businesses feel protected by the assurance of technology, it is really just providing another avenue to perpetrate fraud.

There are some traditional areas where fraud is perpetrated:

• Stolen stock is probably the most common, and it can be from a ream of paper to more extreme cases where employees furnish entire houses with stolen goods.
• The second - payroll fraud - can be perpetrated through directing funds to a dummy employee on the payroll or diverting union fees into another account.
• The third most common area of fraud is around the security of cash and cheques. When a company has a single signatory system it leaves them vulnerable, as does the accessibility to cash.

To help protect your business against fraud, there are several things to take note of.

• Employees often commit fraud to support a lifestyle or addiction, and it can be brought on by significant life changes like a marriage breakdown.
• Telltale signs of fraud are when people start living outside their means, buying new cars and homes or taking holidays when they never did before.

The fallout of fraud can be detrimental to a business's bottom line with the average value of large fraud cases in Australia above $2 million*.

If fraud is discovered, it is important that employees and management understand whistleblower legislation and the mechanisms for reporting fraud.

Employees and businesses must protect themselves and ensure they can present a strong body of evidence for the perpetrators to be prosecuted.

* KPMG Fraud Barometer, June 2010

About HLB Mann Judd Brisbane:

HLB Mann Judd Brisbane is a mid-tier chartered accounting firm with more than 30 years experience and is part of the HLB Mann Judd Australasian Association.

HLB Mann Judd Brisbane provides services including audit and assurance, business services, wealth management and tax consulting.

With eight partners and more than 80 staff in their Brisbane CBD office, they are well placed to service clients of all sizes and from a range of industries with specialties in the property, medical, legal and hospitality industries.

Visit our website- HLB Mann Judd Brisbane