Fraud Prevention Through The Use Of Contracts

Abstract

The most cost-efficient means to manage financial loss by fraud is prevention. In this study it is attempted to explore the concept of “Fraud Prevention” in a holistic context. The paper deals that how through the use of contracts and policies, fraud in a business can be prevented. Ways are also concluded to help my business into prevent getting legal issues. The research also analyzes many aspects of frauds in a business and tries to gauge its effect on business reputation. Finally the research describes various factors which are responsible for prevention of fraudulent actions.

Fraud Prevention Through The Use Of Contracts

Introduction

The most lucrative approach to cope with decrease in financial value through fraud is prevention. A company defrauded, according to the ACFE- Association of Fraud Examiners, is not likely to ever recuperate its losing. ACFE in its report on Occupational Fraud and Abuse published in 2004, figured that 6% of its annual revenue is cost by fraud in a typical U.S. company. Therefore, for a mid-market business with sales exceeding $500 million, $30 million fades away per annum from revenue because of inattention of company to fraud and its prevention. About 508 cases of work-related fraud were studied in the 2004 ACFE report, explicated over $761 million in financial losses.

Undoubtedly, fraud is a persistent corporate issue, and without regard to company size, it impinges on corporate across industries and time zones. All organizations are exposed to fraud risks. Because of disastrous consequences of fraud, lacking to set prevention practices in place could hold a company insolvent within days. Fraud prevention, in that case, is a specified course of practical procedures to evade or tone down fraud.

In a small-business environment, owing to comparative grading, the greatest financial blow of fraud can come about. For any company, a red ink of 6% of revenues is considerable, nonetheless great, but a small-scale business whose gross profit are meager and backlogs absent will set out bankrupt. Albeit an operation bears the financial loss, its continuity of business can be in danger and it may not be any more capable to operate as an autonomous body. When fraud turns into a cost of getting into business, weaknesses in addressing of these issues put a business at a competitive disadvantage. This impingement happens to even more significant through cost avoidance, because product or service costs can be lowered by the competitors to their consumers as their profits yield is higher because it becomes unaffected through fraud prevention. Disclosure of noteworthy fraud publicly can irredeemably harm brand of a large organization. The status, brands, and reputations of many organizations have been unconstructively impacted by bared fraudulent behavior of key executives around the globe. Sensational media coverage of fraud is translated by customers and vendors into an early indication of declined market value in the offered product or service, ensuing in going down sales and revenue. It can even escort to the collapse of the business in market in extreme ...