Consideration of Fraud Within Small Business Organizations

Consideration of Fraud within Small Business Organizations

Introduction

In recent studies made by Klynveld, Peat, Marwick and Goerdeler, LLC (KPMG), Fraud and

Misconduct survey 2010 shows “The value of frauds committed by employees has double

during the past two years with the average case now costing victims $3 million. The survey

found that 61% of cases, there was no recovery of cash stolen, and that the average time to

detect major fraud has increased from 342 days to 399 days. It also confirms the traditional

profile of the average fraudster: a 38-year old male, who has been with a business for several

years and holds a management position”.

This paper analyzes and examines the three elements of the fraud triangle, including it’s

characteristics, symptoms, and fraud prevention programs according to the case scenario.

The fraud triangle theory was first accredited to Donald R. Cressey, integrating the three

elements that must be present for occupational fraud.

*Perceived Pressure

*Perceived Opportunity

*Rationalization

According to the Association of Certified Fraud Examiners (ACFE), “Fraud encompasses a

range of irregularities and illegal acts characterized by intentional deception or

misrepresentation, which an individual knows to be false or does nor believe to be true.

Further, fraud is perpetrated by a person knowing that it could result in some unauthorized

benefit to him or her, to the organization, or to another person, and can be perpetrated by

persons outside and inside the organization”.

Case scenario

Plutonium an internet start-up company, developed its technological systems necessary to

support the rapidly expanding user base. However, many of their systems had been added

hastily, resulting in poor integration and eroding data integrity. Therefore, CEO of Plutonium

announced an initiative to integrate all systems and increase the quality of internal data by

purchased an expensive and complex billing...