As incredible as it may seem, the U.S. Chamber of Commerce estimates that employee theft may be as high as $20-$40 billion annually. That's more than $400 each year for every working man and woman in the country!
 
The figures from the Association of Certified Fraud Examiners are even more staggering. Citing estimates by various experts, they project the annual cost of fraud of all types to be between two and five percent of our nation's Gross Domestic Product, or $186-$310 billion, which is a whopping $3,800 for every person in the workplace.
 
Employee theft and business fraud are pervasive problems which most people want to ignore. But we can't pretend they don't exist since we are all paying the price (on the average about 2% more on each retail purchase we make during the year.) With the advent of computers, fraud has taken on heights never before seen.

Fraud Prevention, Detection and Recovery

Fortunately, there are methods to discover fraud and prosecute offenders. As the problems have become more serious, so have the ways to protect yourself strategically and technologically.
 
According to William R. Legier, CPA and managing director of Legier & Materne, apac, Consultants and CPAs, there are systems and procedures to help prevent fraud as well as measures to quantify the extent of fraud when it happens. "We have methods to identify the problems and provide the cure," said Legier, who is also a Certified Fraud Examiner with Advanced Standing and a member of the Association of Certified Fraud Examiners.
 
Legier has been called into a number of large cases both as an examiner and an expert. "In one instance, we were contacted when a national company was defrauded out of $200 million worth of assets and another time when major national institutions were victims of a $135 million securities fraud scheme."
 
"As a firm, we are called in frequently because we are well known for our creative approaches to detecting and quantifying losses from fraud. We are consulted when there is a suspicion of fraud and the details and amounts have to be quantified and the methods identified and reported so those responsible can be brought to justice. We also focus on recovery for our clients," he said.
 
Oddly enough, many frauds are caught by accident and generally occur where there are improper or nonexistent controls, or where procedures are not enforced by companies. The potential signs of fraud that company officials should be on the lookout for include lax or nonexistent internal controls and accounting procedures, an unexplainable drop in gross profit margins, operational expenses in excess of the budget, lower than expected profits that are unexplainable and key accounting staff in sensitive positions who don't take vacations.

"There is a Cure"

Legier said the best cure to avoid fraud is to have well defined internal controls and accounting procedures in effect and monitored at all times. "Our firm will go in and provide as part of our fiscal checkup an evaluation of accounting procedures and other internal controls through a comprehensive list specifically designed for this purpose. We will then make recommendations that ensure that the structure is in place to safeguard the company's resources. Sometimes, it's as simple as making sure there is a proper segregation of duties and requiring employees in sensitive areas to take regularly scheduled vacations. Other times, it becomes more complicated," he said.
 
The best recommendation Legier can make is "to advise company owners and officials to take the matter seriously and consult professionals to combat one of the fastest growing problems in the marketplace."