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SIMPLE
yet repetitive forms of deception inside companies, done
continuously, may result in huge sales declines and poor
performance of business operations, leading tax and
business advisory firm Punongbayan & Araullo (P&A) said
at a recent seminar on business-fraud detection and
prevention.
Fraud
existence is deemed alarming, as a survey in the United
States showed the average scheme lasts about 18 months
before it is detected—a period when losses can
accumulate to as much as more than 5 percent of a
company’s gross revenues. The amount is no peanuts: at
least $600 billion in America, according to expert
estimates. A similar assessment is still in the works in
the Philippines.
Even
though the Philippines doesn’t have a complete and
concrete study to present figures on fraud detection,
Lilian Linsangan, P&A’s business risk services group
head, believes there is similarity in the local
situation with the US. As an example, she cited
employees’ habit of getting school supplies entrusted to
them by the office, like pencils and bond papers.
“Getting
school supplies in small numbers is unnoticeable, but it
will surely reflect on the inventory report by the month
of May or June, when classes opens. It is a form of
savings at the company’s expense; as a result, the
latter has no other option but to increase supply order
in the coming months,” explained Linsangan.
The
business risk services, audit and assurance partner of
P&A, Juan Carlos Robles, also shared other forms of
fraud which he previously handled.
“I
encountered an HR [human resources] personnel who
manipulated the papers of contractual workers who were
no longer engaged in the company. The owners were abroad
and didn’t know that salaries they allotted for the
workers were being received by their dishonest
employee,” said Robles.
Robles
added, “Another example was the quality controller in a
garments company who falsified reports on the numbers of
rejected and damaged clothes and textiles to sell the
products fast at volume discounts.”
From the
examples, Robles said, fraud is often committed by
people in positions of trust in the company. He
observed, “In the local arena, women have the [greater
opportunity] to commit fraud since they are in a
position of trust and of managing the businesses’
wealth.”
Fraud
often starts with a rationalization, according to
experts. A fraudster justifies what he’s about to do as
something that will help him without necessarily hurting
the company. It is followed by a provoking pressure
known as motive. According to the National Bureau of
Investigation, gambling debts are a top cause of fraud
in the country. The last cycle in the fraud triangle is
the opportunity. People in higher positions have open
chances to execute the action and there is no fear of
doing so because sanctions are not fully implemented at
all levels.
Robles
averred, “Fraud is the silent crime that costs billions
of pesos.” In the US alone, it cost $600 billion. Poor
corporate governance, poor internal-control systems and
poor reporting are the origins of fraud. A similar
effort to estimate losses to fraud in the Philippines is
under way.
The
creation and maintenance of an honest culture and high
ethics, establishment of strong internal controls,
breaking the fraud triangle (rationalization, motive,
opportunity), paying attention to the warning signs of
fraud and implementation of a fraud prevention program
are the key factors raised by Robles to prevent company
fraud.
Preventing deceitful hoax is necessary to protect the
interest of stakeholders and remain on target of
reaching company goals. |
