Employee fraud is defined as an employee (including senior management) obtaining an unjust gain by deliberately misusing or misappropriating the resources and assets of the business they work for. The purpose of a fraud audit is to determine whether employees of the business have engaged in any deliberate, deceptive act in order to obtain an unlawful benefit for themselves.
According to research, fraud in businesses is increasing in both frequency and amount:
- In general, 10 per cent of employees commit fraud in a planned way, and 75 per cent tend to commit fraud when the opportunity arises.
- Economists estimate that businesses in Türkiye lose 8–10 per cent of their annual revenue to fraud (in the USA this rate is 6%).
- The average time it takes businesses to uncover employee fraud is 16 months.
- 50 per cent of frauds occur because of weak internal controls.
- 70 per cent of frauds are committed by employees with at least 4 years of service.
The main conditions that make fraud possible in businesses can be listed as follows:
- Ineffective corporate governance, weak “tone at the top”
- High-level incentives offered for financial success
- Complexity in the rules, regulations and policies of the business
- Unrealistic budget targets imposed on employees
- Poor flow of information among employees
- Inadequacy in assessing the quality of the work employees do
- Inadequate internal control
- Not obtaining a sound independent external audit service
The world is aware of the importance of fraud auditing, and fraud examination has become a specialism in its own right. In our country, too, business owners are only now beginning to realise the importance of the subject. There is great benefit in businesses establishing the necessary internal control arrangements against employee fraud and obtaining independent external audit support.
If, in the company,
- there is concern that fraud is being committed,
- it is thought that some managers or employees have a standard of living above the salaries they receive,
- there is a wish to assess internal controls and determine fraud risk,
- there is a wish to establish internal controls against fraud risk, a fraud audit is needed.
We approach cases with the view that no fraud is small or insignificant. In fraud cases, the financial loss visible at first glance is usually the tip of the iceberg. Behind acts of fraud that appear to have been escaped with small financial losses, far greater misconduct may emerge.
In fraud audits we work on preventing fraud, investigating it and determining the likely loss caused to the business. In our prevention service, our aim is to identify the organisation’s weaknesses in relation to fraud, prevent possible misconduct and fraud, and deter the fraudster. Prevention activities, the most important, most effective and most economical way of combating fraud, consist of preparing the organisation’s code of ethics, establishing fraud prevention policies and delivering fraud awareness training.
With irregularity investigations we ensure that internal controls operate more effectively, so that errors and fraud that may arise in the business are uncovered more effectively, or are prevented from occurring.