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3 Most Common Types of Employee Fraud

Updated: Jan 26

Employee fraud is a deliberate act that involves using deception to gain advantage from a position of trust or authority. Harmful impact of employee fraud can extend to other employees, customers, other businesses within the company’s network and the industry as a whole that the business operates within. It has been reported that corporations the world over lose an estimated 5% annually to fraud. Although that figure may seem insignificant, when applied to the estimated Gross World Product of that year (2011), it translates to a potential total loss of more than $3.5 trillion. In this article, we'll take a look at three of the most common types of employee fraud to better understand how you can protect your business.

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1) Financial Statement Fraud

Financial statement fraud is just what it sounds like – falsifying balance sheets, income statements and cash-flow statements to fool the people who read them. More often than not, financial statement fraud is committed by the management to hit certain targets or achieve specific objectives in order to create an illusion of success. The fraudster may be out for personal gain, or is trying to keep the business afloat.

2) Asset Misappropriation

Asset misappropriation is a fraudulent activity that occurs when a company’s assets are stolen or diverted for personal use. Defined as fraud involving third parties or employees stealing from an organization through fraudulent activity, asset misappropriation can take a lot of different forms, including:

  • Deception by employees.

  • False expense claims.

  • Embezzlement by altering accounts or creating inaccurate invoices.

  • Payroll fraud by diverting payments.

  • Data theft and intellectual property theft.

Asset misappropriation is a large umbrella term for a lot of different types of employee fraud and can be committed by company directors or anyone else entrusted to hold and manage the assets and interests of an organization or its employees. However, asset misappropriation does exclude straight theft from an organization by insiders. For example: stealing stationery or other physical assets.

3. Corporate Credit Card Fraud

Corporate credit card fraud occurs when an employee uses the company card for personal gain or purchases instead of legitimate business purposes. Organizations provide corporate credit credits to employees for a range of reasons, however, typically they exist to allow for flexibility when undertaking work related travel, purchasing goods and services and, in some cases, entertaining clients. Unfortunately, the possession of a corporate credit card can prove, for some, all too tempting to misuse, particularly if the threat of detection is considered by employees to be low.

While the list is not exhaustive, the following are some of the ways employees misuse corporate credit cards:

  • Deliberately over quoting travel expenses in order to withdraw more money than entitled to;

  • Paying school fees and purchasing school uniforms;

  • Paying for fuel, car servicing or purchasing a family car;

  • Purchasing personal clothing and gifts;

  • Paying off a personal credit card or mortgage; and

  • Unauthorized withdrawal of money in order to gamble, purchase drugs or pay for prostitution services.

Employee fraud can affect any organization, regardless of size or type of business, and poses a major risk not only to the financial bottom-line but also to reputation. Professional private investigator agencies have knowledge and expertise within the field of employee fraud and will be able to advise on the best preventative measures or next actions you need to take in safeguarding your business. If you feel that your company may be at risk from a particular employee or associated individual, you can take steps to prevent this from developing and further harming your business by hiring a professional private investigation team.

If you would like to discuss a commercial fraud investigation or an asset search for financial recovery, reaching out to a professional and speaking in person sounds the best decision!

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If you're looking for an experienced PI that to help solve your case or if you need some advice on an ongoing case, you may contact Asia Top Investigation at or 📱 9651 1969

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