Date of Award
Master of Science in Economics (MSECO)
Estimate show that businesses will lose approximately 5% of revenue annually to occupational fraud. A small business generating $5 million in annual revenue will be estimated to lose $250,000 annually to fraud. The small business owners, with only a few employees, do not have the luxury an internal audit department to keep fraud in check. The small business owners must rely on themselves to be the audit department and it has to happen in a cost effective manner. In order to combat the possibility of fraud, the small business owner must first be familiar with the concepts of the fraud models. The fraud triangle theory states that three elements, pressure, opportunity, and rationalization, must be present for fraud to occur. The small business owner can deter fraud by eliminating one of the elements. Opportunity can be weakened with the segregation of certain duties, requiring mandatory vacations, monthly account reconciliations and analysis. Capability, must be considered when evaluating how fraud could occur. Open communication and education of fraud awareness is also a vital tool in deterring fraud. Employees should be made aware that management is conscious of the possibility of occupational fraud and that such actions will not be tolerated. The small business owner does not need to spend a lot of money on fraud deterrence measures. Establishing firm policies, communicating with employees and creating internal controls are all cost effective deterrents to combat the opportunity and capability of occupational fraud.
Dunne, Judy, "Small Business Occupational Fraud" (2014). Economic Crime Forensics Capstones. Paper 3.