Missing Or Stolen Inventory

Why Employees Steal & What You Can Do About It

If only employees prone to fraud had the letter ‘F’ stamped on their forehead? You could monitor them closely and make sure they never had access to the accounting books, but potential thieves are never that obvious.

It starts with pressure

In many cases, employees who commit fraud are the most likable people in the office — personable, helpful, and good at their jobs – and seemingly trustworthy. However, fraud does not begin with dishonesty; it begins with pressure. The pressure may be work-related (corporate demands to meet revenue goals) or personal (gambling debts or substance abuse).

Unfortunately, many of the skills needed to successfully commit fraud also are necessary to thrive in the business world. Salesmanship, sociability, determination, persistence, competitiveness, and a desire to obtain material possessions all are frequently cited as characteristics of successful professionals and successful criminals.

The usual suspects

Occupational fraud perpetrators generally share certain traits. For example:

Entitled executives. Upper-level fraud perpetrators tend to be extremely ambitious and have an overdeveloped sense of superiority. These individuals are likely to be unreasonably sensitive to criticism or scrutiny and to surround themselves with sycophants. They might doctor financial statements to make the company’s (and their own) performance look better or embezzle funds.

Resentful workers. Rank-and-file employees who commit fraud are more likely to feel they have been undervalued, underpaid, or treated unfairly and justify their theft accordingly. Some steal to seek retribution.

Con artists. Fortunately, this type of thief, capable of lying to people’s faces and leaving them penniless without remorse, is not common in the workplace. But con artists can be destructive, and they usually blame their victims.

Some people with these attributes steal only if under pressure, while others withstand similar pressures without turning to fraud. In companies with strong internal controls, fraud is too risky for most employees to attempt, even if they are feeling financial pressure. While in more-lax environments, just about anyone might try their luck. For this reason, comprehensive internal controls are always recommended.

Putting ethics first

It is not easy for companies to spot dishonest employees. So, in addition to shoring up your internal controls, you also should foster an ethical business culture. Promote and reward honesty and punish those who violate rules. For help creating an ethical environment, contact us.

Related Articles

Talk with the pros

Our CPAs and advisors are a great resource if you’re ready to learn even more.