As the credit crunch tightens, Midlands businesses must become ever more vigilant against fraud, an expert has warned.
Four out of five companies worldwide have been hit in the past three years and UK corporate fraud is set to hit record highs this year, it is claimed.
Fraud costs the global economy hundreds of billions of pounds each year and the Midlands is often named as one of the country’s hot spots.
Stephen Lewis, forensic partner at accountants Mazars in Birmingham, said: "Fraud can affect all businesses whatever their size and sector.
"There are key warning signs to look out for and the identification of these can be critical. However, there is often a lack of understanding and resource which means the necessary prevention and detection systems are not in place. As a result the obvious signs are not being recognised or at worst ignored."
Very often fraud is perpetrated from within an organisation, and as the economy weakens more employees may be tempted in a bid to solve their own financial problems.
Changes in employee behaviour can be a key indicator. Other general categories include IT related fraud, collusion between employees and third parties and false accounting.
Mr Lewis said: "Businesses must have adequate systems and controls in place to manage the fraud risk. However in the event that a fraud is identified then its investigation and resolution is essential.
"Adverse cash flows can be an indicator of fraud. If there are inconsistencies in actual cash flows compared to the expected position, then this may be indicative of a problem. Other matters to look out for include overly complicated transactions or transactions that seem unusual for the business.
"Companies should spend time developing and implementing policies to become better equipped to deal with fraud issues. These will include staff training so that potential signs of fraud are identified and the creation of an open and honest culture where reporting unusual behaviour is actively encouraged.
"Whilst it will not be possible to have a system to completely prevent fraudulent activity, it is possible to implement changes to reduce the risk. Typical examples, which although relatively simple, might include ensuring that those employees tasked with posting invoices are not the same as those raising payment, checking invoices actually exist before authorising payment, and introducing controls into computer programmes so that supplier bank details can not easily be altered.
"By implementing such procedures companies can become better equipped to deal with the risk of fraud in this uncertain economy."