Consideration of Fraud within Small Business Organizations
In recent studies made by Klynveld, Peat, Marwick and Goerdeler, LLC (KPMG), Fraud and
Misconduct survey 2010 shows “The value of frauds committed by employees has double
during the past two years with the average case now costing victims $3 million. The survey
found that 61% of cases, there was no recovery of cash stolen, and that the average time to
detect major fraud has increased from 342 days to 399 days. It also confirms the traditional
profile of the average fraudster: a 38-year old male, who has been with a business for several
years and holds a management position”.
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During the integration, a phony
credit card number was created, that could be used by developers and programmers to test the
functionality and integration of the system. Moreover, this credit card number was fully
functional in live environments so tested and developers could ensure functionality without
being required to use actual personal or company credit card numbers. (The activity on this
card was not monitor). The integration went smoothly; however, it created thousands of
corrupt accounts that required fixing.
* Jonathan, manager of the operations department and responsible for the resolution of all data integrity issues
* Chris, one of the top performers on the operations team with more than a year of service, quickly became a trusted and valuable team member; thus Jonathan gave him and other team members the phony credit card number in order to further increase the productivity of the team. However, Chris was making $15 per hour, the same salary at which he was hired. He was an introvert working to support a family and out himself through school.
After six months of working at plutonium, Chris received an official reprimand from the
company for using the company system to access websites containing pirated software and
music. The FBI attended the investigation and determined that Chris had not been a major
player in the piracy. Therefore Chris was quietly warned and placed on a short-term
probation. Jonathan was asked to write a warning letter for the action; however after a brief
conversation with Chris, Jonathan determined that Chris intentions were good and never
officially submitted the letter because Chris was a trusted employee and elevated the
performance of the team.
Jonathan noticed some changes in Chris’s behavior such as:
* Computer monitor was repositioned so that his screen was not visible to other co-workers
* New palm pilot
* New MP3 player
* New Play station
* New laptop
* New car stereo system
* Going out to lunch more frequently
* Has multiple fake user names and passwords that he frequently used for testing purposes
Elements of the Fraud triangle, perceived pressure, perceived opportunity and rationalization
are common to every fraud. Whether the fraud is one that benefits the perpetrator directly,
such as employee fraud (case scenario), or one that benefits the perpetrator’s organization,
such as management fraud, the three elements are always present. (Page 34)
According to the textbook, every fraud perpetrator faces some kind of perceived pressure.
Most pressures involve a financial need, although nonfinancial pressures, such as the need
to report financial results better than actual performance, frustration with work, or even a
challenge to beat the system, can also motivate the fraud.
In Chris case, person's incentive...