Fraud can be defined as the act of activities that lead to securing illegal or unlawful gains from a company or an organization. Fraud has a negative impact on the victim who could be an individual or a group of people. Fraudulent activities are illegal because the effect of these actions often deprives the victims of these events their legal right. In business organizations, fraud can present in the form of a civil wrong or a criminal wrong. In fraudulent civilian activities, the business organization can sue the individual involves while in a criminal fraud, the government imprisons the culprit of the fraudulent activity (Wong, 2011). Companies and agencies should establish policies that are aimed at not only prevention of the fraudulent cases but also detecting the acts of fraud in case they occur. Companies should be in a position to establish fraud prevention and detection policies. Fraud prevention policies are strategies that reduce the risk factors associated with fraud from causing fraudulent activities. Fraud detection strategies, on the other hand, are strategies that enable companies to be aware of acts of fraud that could be happening in an organization. Quest Diagnostic Company has faced the most number of fraudulent cases which led to the loss of over 1.2 million. The money lost as a result of fraud cases that affected Quest company were both criminal and civil. The most cases of fraud that have changed Quest Diagnostic Company were cases of fraudulent employee cases. Employees caused fraud in this company through faking expenses and receiving money from the company. Quest Diagnostic company had been paying employees for expenses that were never incurred. Companies should, therefore, create fraud awareness controls to prevent losing money because of fraud. Fraud increases the cost of production and lowers the profit maximization rate. This paper analyzes the fraud prevention policies that can be adopted by Quest Diagnostic policy to detect and prevent the occurrences of fraud. Fraud risk factors are some of the factors that can increase the occurrence of fraud in a business organization. Business organizations like Quest Diagnostic should put in place management strategies that help reduce the chances of fraud taking place in a business company. Risk factor management is the activities that enable businesses to reduce the effect of fraud occurrences in their operations. The extreme cases of fraud are known for the most reported cases of business failure. A successful business should, therefore, ensure that they reduce the possibilities of the occurrence of fraud. Availability of large amounts of cash in a business organization is one of the risk factors associated with fraud (Pinder, 2003). Quest Diagnostic company was affected by fraud because employees took money from the company to pay for false expenses. The chances of the occurrence of fraud can be prevented by reducing the availability of cash in the business. Quest Diagnostic Company can, therefore, reduce the chances of fraud through reducing the amount of money available in the petty cash. Having a little balance in your petty cash is a fraud risk factor management strategy in a business organization. Ease of resale is also a risk factor associated with fraudulent cases in an organization. Ease of resale increases the occurrence of fraud because it gives employees the ease of selling the company’s assets (Scully, 2017). There are two types of assets in a company including current assets and long-term assets. Current assets include the goods that can be easily sold or those that are meant for resale for example stock and inventory of the organization. Long-term assets, on the other hand, include assets that are not for resales such as buildings, vehicles, and furniture. Fraud risk factor of reselling organization's assets can be reduced by reducing the access of company’s current assets. Lack of adequate documentation is also a risk factor associated with fraud issues. The accounting department of a business organization should have a bookkeeping record that has all the transactions that take place within the internal and external business environment. Keeping transaction records makes it easy for the process of auditing to take place. Verification ensures that all the resources available to the business were used as economically and efficiently as possible. Keeping an electronic bookkeeping record also reduces the chances of fraud cases because it prevents employees from participating in fraud for fear of being caught. A good financial bookkeeping record exposes all the transactions that take place in a business organization (Davenport, 2012). Keeping an excellent organized electronic bookkeeping record in a company is a strategy for fraud risk management of a business organization. Complex duties and transactions is also a risk factor associated with fraud in business organizations. Complex responsibilities and operations are those that that require professional employee's skills. Employees are most likely to participate in fraud when dealing with complex duties and transactions because of the limited knowledge of these activities. Organizations can conduct fraud risk management through reducing the number and frequency of complex operations. Fraud risk management related to complex transactions can also be reduced by reducing the number of members who are responsible for these deals. Having a lot of employees responsible for complex increases the chances of fraud in an organization. Lack of auditing in a business organization is a risk factor associated with fraud in companies. Verification enables a business organization to follow up on all the transactions that have occurred in the team within a specific period. Auditors can be internal or external auditors. Internal auditors are those editors who are employees of the business organization while external auditors are hired by the agency to perform auditing services for the organization. The two types of editors all perform the primary function of keeping the business’s transactions in check. Employee training is a critical strategy that can be used by Quest Diagnostic Company to reduce the occurrence of fraud in a business organization. Employees should be trained on how to deal with pressure for financial gain. Some factor increases the urge of an individual’s financial gain. The family is among the causes of increased financial gain in the society (Financial Crimes Report. 2006). The needs and responsibilities that individuals have in the family increase the chances of an individual participating in fraud. A business organization should, therefore, train its employees on how to deal with the limited responsibilities faced in the family context of the society. Personal relations and self-control are some of the vital training that employees should be involved in. Self-control enables an employee to manage the expense forces that drive people to conduct fraud. Fraud rationalization is also a training strategy that can help Quest Diagnostic Company to reduce the frequency of the occurrence of fraudulent issues. Rationalization is an educative strategy that portrays the adverse effects of fraud activities and in turn, makes employees to shy away from participating in fraud. Rationalization is awarenesses that convince an employee that the acts of fraud are not justified in the institution. Rationalization training can be done orally before the occurrence of a fraudulent action or can also be done practically after the incident of fraud within a business organization. Through seminars and meetings, employees can be trained on how to reduce fraud by making them understand the adverse effects that fraud has on the productivity of the business organization (Singleton, 2010). Employee training concerning the effects of fraud enables employees to shy away from fraudulent activities just because everyone else in the organization or the society is participating in fraud. Rationalization can also take place in the form of educating the employees on the consequences associated with participating in fraud. Both the civil and criminal forms of fraud have dire consequences associated with participating in this form of unethical activities. Employees who participate in fraudulent civil activities such as receiving money for false expenses should be made aware that these actions could lead to the termination of their contract and be sued for the total amount of loss incurred by the company as a result of the fraudulent activities. For criminal cases, employees should be trained and educated regarding the consequences individual faces when finding guilty of participating in fraudulent issues. This training could include the number of jail term associated with specific amounts and frequencies of fraud and also the amount of bail money associated with participating in fraudulent actions. Through employee rationalization, the organization will reduce the rate of fraud cases because employees will shy away from engaging in fraud due to the dire consequences suffered when found guilty of fraudulent allegations. Fraud detection is also a strategy that business organizations use to prevent the occurrence of fraud. In most cases such as in Quest Diagnostic company, the business organization was already experiencing fraud cases. Fraud prevention cases could not efficiently solve these fraud issues because they had already affected the company and incurred a loss of up to 1.2 million. Fraud detection, therefore, enables a company to identify the cases of fraud at their early stages to prevent the extremely adverse effects of fraud from taking place in the business organization. The merits of fraud detection policies are that these strategies can be set and managed by the company’s internal management. Employee controls and supervision policies is a policy that can be used in fraud detection. There are incidences when the management of a business organization fails to detect fraud or is not in a position to prevent fraud. In such cases, the business organization should establish controls and supervision policies to detect the occurrences of fraud in the business. Employee control measures are set rules and standards that govern the services and functions of every employee in the company. Controls can be set to ensure that every employee has specific roles and responsibilities in the company to avoid mix up of duties. Controls make it easy or the management to identify cases of fraud and also identify the individuals who are responsible for the fraudulent activities. Controls also make it easy for a business management to conduct efficient supervisions of the work done by every employee during the production process. Supervision is also a strategy that Quest Diagnostic Company can employ to identify the occurrence of fraud in their company. Fraud detection is essential because it not only enables a company to identify the existence of fraud in their company but also helps the company to identify the specific individuals who are responsible and guilty of the fraudulent acts (Nigrini, 2011). Supervision can be termed as the act of keeping up to date with the roles and responsibilities of employees in an organization. Supervision instills discipline among employees in a company. Companies which have strict supervision policies benefit from this strategy because their workers perform duties at the right time, using the right amount and quality of resources and using the recommended person for the specified responsibilities. In addition to work supervision, an organization can also adopt the strategy of financial supervision within the internal environment of the company. Financial supervision is similar to auditing, but these two types of fraud prevention differ about the time when they are conducted. While auditing is conducted after the occurrence of business transactions, financial supervision takes place when the business transactions are being transacted. During financial supervision, employees shy away from the fraudulent activities because of the ease of being caught. Financial supervision can be done in the form of accounting reconciliation and analysis. Accounting reconciliation and analysis take place through the analysis of the financial information of an employee with that of the financial supervisor. The two financial information should always be similar, failure to which cases of fraud should be investigated.Fraud detection enables business organizations to identify cases of fraud and prevent them from taking place extensively. Lastly, Quest Diagnostic Company can reduce the causes of fraud through senior management support in reducing ad detecting fraud in the organization. Most of the cases associated with fraud in a company often begin from a senior management because of their easy access to the assets and resources of the company. The senior management of a business should, therefore, lead and manage the business by setting good image and example for the rest of the employees to follow. A management that participates in fraudulent activities encourages its employees to engage in fraud. Setting a good example for the workers helps a company to reduce the cases of fraud in their organization. In conclusion, fraud is the illegal acts in a business organization that has a negative impact on the revenue generation of the business. Fraud leads to business failure. Companies should establish strategies that can enable them to reduce the occurrence of fraud and also detect the cases of fraud at an early age. Company management that aims to succeed in business should, therefore, establish the external and internal strategies that reduce the risk factors associated with fraud.
References
Davenport, E. (2012). Inside the World of Fraudster Fast. American Business Journal . Financial Crimes Report. (2006). FBI . Federal Bureau of Investigations.
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Nigrini, M. (2011). Forensic Analytics: Methods and Techniques for Forensic Accounting Investigations . Hoboken, New Jersey: Wiley & Sons.
Pinder, J. (2003). Crazy Eddie Founder Guilty of Fraud . The New York Times. Retrieved from http://www.nytimes.com/2003/07/21/business/crazy- eddie -founder-guilty-of-fraud.html. Singleton, T., and Singleton, J. (2010). Fraud Auditing and Forensic Accounting . Hoboken, New Jersey: Wiley & Sons. Scully, M. (2017 ). Auto Loan Fraud Soars in a Parallel to the Housing Bubble . Bloomberg News. Retrieved from https://www.bloomberg.com/news/articles/2017-05-10/auto-loan-fraud-is-soaring-in-a-parallel-to-the-housing-bubble .
Wong, T. (2011). The Law of Fraud and White-Collar Crime in Canada. Canada Financial Journal.
