The payroll is the largest expense area for many organisations, and one which should be controlled carefully. Nevertheless, payroll fraud accounts for 17% of all fraudulent disbursements suffered by organisations. There are three main types of payroll fraud – Ghost Employees, Overcompensation, and Bonus and Commission Schemes.
One of the key tasks for managers of organisations is to reduce the risk of events which will affect the ability of their organisation to achieve its goals. These include risks in the areas of occupational health and safety, finances, market and competitors, supply, compliance and regulatory, currency, professional, disaster and fraud. Managers are usually proactive in reducing all of these risks – except fraud. Why is this?
When it comes to employee fraud, prevention is definitely better than cure. So why do executives who routinely minimize other risks to their organisation fail to address one of the most commonly occurring threats – employee fraud? Perhaps they believe that they would notice any fraud before it became serious, or that their employees are all trustworthy, or it is the auditor’s job to spot fraud, or that this is an area that is too organizationally difficult to for them to address.