The Victims of Business Fraud

By Adeniyi Bamgboye

A business can take many precautions to prevent fraud. If businesses will take the appropriate steps and procedures to prevent fraud, then their losses can be nonexistent or minimal. It could be prevented by having strong internal controls within the business. For these controls to be effective, the management must consider factors such as the nature and size of transactions, the cost of setting up those controls and benefits obtained thereby, and the geographical distribution of the business.

Fraudulent activities within a business will not only serve as a clog to the wheel of progress of such an entity in terms of causing a drastic reduction in its profitability on the short term, but also negatively affect its ability to continue to operate as a going concern in the long term.

An old cliché says “an ounce of prevention is worth a pound of cure”. Preventive measures should not be handled with kid gloves. Large corporations and many medium and small companies do not like to prosecute fraudster since they rationalise that it could hurt their image. Businesses can be victims of fraud in three areas.

The first area is that which relates to the customer. This common fraud involves the customer walking into a business area thereby stealing goods that are on display. It is either concealed in bags, undergarments, or elsewhere. Tracking this shrinkage can be done through an educated observation of the customer while in action. Most business owners now deploy the use CCTV cameras; even go to the extent of snapping and pasting the pictures of offenders at strategic and visible locations within the store. This is to serve as a deterrent to those who may be nursing such shoplifting ambition in the future. For professionals who are into the business of exchanging ideas and by extension, service delivery, it is worthy of note to say that plagiarist are on the prowl, which makes it highly imperative for such  professionals to get sufficient copyright protections  for their ideas , initiatives and intellectual properties..

Secondly, employee fraud is also another area worthy of mention. Most employees are not dishonest when they are first hired. They only become dishonest when the opportunity becomes available. The onus now lies on the business owner to ensure those avenues for fraudulent activities to take place are always blocked. There is high propensity for this type of fraud to occur when elements such as the items of value, perpetrator and opportunity are in tandem with one another. Employee fraud usually involves cash register thefts, payroll falsification, issuing fraudulent refunds, embezzlement and check kiting.

Hiring honest employees is crucial. A background check can be conducted to ensure the company is about to employee the right person. This exercise will depict the character, reputation, credit history, public records and references of such applicant and also aid in the proper evaluation of the applicant with regard to his or her fraud potentials. The employee, after being hired should be provided with an environment that will discourage dishonesty. Treating employees fairly can perform the magic.

The last element of fraud relates to the vendors and suppliers. Businesses face vulnerabilities through kickbacks which may involve the sale of unreported stocks, which are sold and shared by the vendor and employee. The perpetrators of the fraud may also make the business pay for inventory at inflated and unreasonable prices thereby sharing the portion of the excess. This is likely to occur in a business environment where the same vendor is constantly used, the purchasing manager does not take any vacation time, and inventory shows more goods in stock whose availability cannot be accounted for.

Finally, one of the best ways to prevent your business from being a victim of  fraud is to prosecute any employee who commits it while others includes establishing, maintaining and adherence to internal controls,  installing various detection devices for customers – oriented business and also restricting  access to only certain employees where customers and other employees have no business or need. Establishing high moral and ethical standards within the organisation is also very important.

It should be stressed that taking all precautions possible does not guarantee that businesses will not become victims; however, it reduces the chances of becoming a victim. Although, there are still some con artists, regardless of precautions taken, that are still capable of “take your shoes, while you are standing in them”.


Adeniyi Bamgboye is an advisor on accounting, audit, tax and business. He holds an MBA in financial management and a member of Association of Certified Chartered Accountant (ACCA-UK), Institute of Chartered Accountants of Nigeria (ICAN) and the Chartered Institute of Taxation of Nigeria (CITN). He can be contacted with – 08060603156, [email protected]



About Haruna Magaji 5341 Articles
Haruna Magaji is a journalist, foreign policy expert and closet musician. He is a graduate of ABU Zaria and a member of the Nigerian union of journalists. JSA, as he is fondly called, resides in Suleja, Abuja. email him at - [email protected]

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