Employee Fraud: High Risk but Low Priority?

“Forty-five percent of respondents experienced at least one fraud in the (2 year) survey period……(yet) it is clear from the survey that many Australian and New Zealand organisations, including many that have suffered serious fraud loss, have yet to adopt even the most fundamental fraud prevention measures – measures that are usually simple and inexpensive, yet at the same time effective.”

KPMG Fraud Survey of 491 Aust. & NZ organisations, 2004

Despite mounting statistics showing how damaging internal fraud can be, managers often fail to address it with the same vigour as other business risks. Here’s why:

1. “It Won’t Happen to Me”

This mindset is dangerous. Believing your business or your people are immune to fraud is nothing more than wishful thinking. Every organisation is vulnerable, yours included.

2. Misunderstanding or Underestimating the Risk

Some managers simply don’t understand fraud risk. Others assume that because they haven’t experienced it yet, it must be a low-priority issue. Unfortunately, fraud often goes undetected for months, even years.

3. “I’d Spot It Straight Away”

The 2004 KPMG Fraud Survey found that only 12% of frauds were detected by management. Most managers are too far removed from transactional detail to notice red flags in real time. Fraud typically flies under the radar, especially without strong reporting systems or whistleblower protections in place.

4. Super-Employees Will Catch It

Assuming employees will naturally monitor for fraud as part of their daily work is unrealistic. Without clear direction, training and accountability, employees will prioritise what they’re measured on. Fraud prevention needs to be part of the organisational culture, not just a hope.

5. “My Staff Are Like Family”

Trust is important, but blind loyalty can be costly. The idea that ‘mates don’t steal from mates’ is deeply embedded in Australian workplace culture, but fraud is most often committed by trusted insiders. Implementing controls protects both the organisation and the majority of honest employees.

6. Fear of Disruption

Concerned that a fraud risk review will upset staff or disrupt workflow? A well-designed fraud mitigation plan focuses on improving systems, not accusing individuals. It’s possible to integrate fraud controls into broader operational improvements without alienating staff or unions.

7. “That’s What External Auditors Are For”

External auditors do not assume responsibility for detecting fraud. Their focus is on financial statement accuracy, not internal control breaches or misappropriation of assets.

How to Shift Your Approach

If any of these reasons feel familiar, you’re not alone, but they shouldn't stop you from acting. Addressing fraud risk is not just about control, it’s about protecting your people, your clients and the long-term health of your organisation.

You don’t have to overhaul everything overnight, but you do need a plan. Start with:

• A review of internal systems and controls

• Fraud awareness training for staff

• Encouraging whistleblowing in a protected way

• Pre-employment screening

• Regular independent review of risk areas

Need Help Getting Started?

Dolman Bateman can assist with fraud risk assessments, system reviews, and internal control recommendations tailored to your business. If you’re not sure where to begin, or want a fresh set of eyes, we’re here to help.

Get in touch today, don’t wait until it’s too late.

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Disclaimer:

The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.