task 8 redo

Task 8

Labor Management

Kurstie Janinda

BUS210

1. How do internal controls such as separation of duties, redundancy, and centralized processes discourage employees from committing fraudulent acts?

Internal Controls such as separation of duties, redundancy, and centralized processes can help discourage employees from committing fraudulent acts. Separation of duties is the process that every employee will have different work to do. This will reduce the chance of fraud because instead of one employee that does everything, all the employees will help in the overall process.

Redundancy means that more than one employee is in charge for the same transaction. This will reduce the chance of fraud because more people are in charge of the transaction so there will not be a fraud undetected. Centralized processes allow better control knowing that their inventory is being tracked. This will reduce the chance of fraud because it allows the company to be assure that the company's assets will be monitored.

2. Why are some small businesses more susceptible to employee fraud and theft? Explain.

Some small businesses are more susceptible to employee fraud and theft because almost half of the fraud cases studied by the ACFE involved small businesses. The ACFE also found that the average median loss when 12owners/executives are involved, ($723,000) was more than six times the median loss caused by managers, ($200,000) and more than nine times that involving lower-level employees, ($80,000). (Ivancevich, J. M., Konopaske, R. 2013).

Small businesses do not need many employees, so they employees’ numbers are lower than a big company, and they have more freedom. “Small businesses have it rough. They are particularly vulnerable to fraud because they lack the resources to implement complete systems of internal controls and properly segregate accounting duties among their limited staffs” (Smith & Hrncir, 2013).

Also, small businesses usually based on family members, they are more passionate to the company and want it to succeed, but this put the employees in a position that they are easily suspected to fraud.

3. Given that the ACFE “2010 Global Fraud Study” reported that employee tips were the most common way that fraudulent acts are discovered, how can an organization encourage honest employees to report fraudulent behavior committed by co-workers, supervisors, clients, or vendors? The ACFE found that almost 40 percent of fraud is discovered through anonymous tips, the majority of which come from employees. Customers, vendors, and anonymous callers are also good sources (Ivancevich, J. M., Konopaske, R. 2013).

Organization can encourage employees to know that they have reporting options, they can give them different ways to report fraud. The organizations can have special email address, web portal, and special box in the working area.

4. How important is it for an organization to have a code of conduct that defines fraudulent behavior and what happens to those individuals who commit such acts?

It is very important for organization to have a code of conduct that defines fraudulent behavior and what happens to those individuals who commit such acts, so the employees can feel comfortable and safe in reporting options, giving the employees ways to report frauds.

References

Smith, G. S., & Hrcir, T. (2013). Small Business Fraud and The Trusted Employee

Ivancevich, J. M, & Konopaske, R. (2013). Human resource management (12th ed.). New York, NY: McGraw-Hill Irwin

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