Critical Literature Review - Essay Example

Occupational Frauds In order to perform efficient and effective research, it is mandatory to obtain complete information about the thesis objective and understand the underlying meaning and purpose of carrying the research of any particular direction and magnitude. For comprehensive learning of the thesis statement, it is very essential to define occupational frauds before continuing the in depth learning of the topic. Occupational fraud is the term mostly implies towards the application, usage, or utilization of the assets and resources belonging to other people that are the part of the organizational or occupational setup. This term usually refers to the misuse or taking advantage of situations in an occupational environment to achieve personal gains and benefits by purposefully abusing the assets of an organization (Wells, 2007, p. 01). Occupational frauds come under the category of white color criminal activities. A detailed definition of occupational frauds clearly depicts that the commitment of this crime takes place when an employee related to any organization misuses his job position and employee regard in that organization for personal enrichment, overlooks the wrong or suspicious activities of its subordinates, holds a certain share of direct or indirect involvement in any activity that is not fruitful for the organization, involves third parties in the confidential details and information about the job it is responsible for and earn a fortune from it, makes an attempt to victimize the organization in collaboration with third parties, and involves itself in harming or damaging the image and repute of the organization (Blount, 2003, pp. 60-63). Although the definition does not encompass all the occupational frauds taking place in organizational setups however, it enlists the most common and the most significant organizational frauds. Few basic and salient features of occupational frauds are common to all the forms. The features account that this crime is always a secret, concealed, covert activity, the act always includes dishonesty from responsibilities, assets, resources of the target organization always do suffer, and in many situations, it requires many efforts to resolve the matter (Joshi, 2005, p. 06). For extensive understanding of occupational frauds, researchers have categorized occupational frauds with each category consisting of a different perspective of the crime (Koletar, 2003, pp. 19-27). Experts have showed that there exist three fundamental categories of occupational fraud. These three types are: Fraudulent Statements: This involves changing or falsifying the financial statements of the company or organization. This includes the financial statements that are unexceptionally invalid and false. This category also encompasses the gaining management that is only the fraction of the real statements of the organization. This includes intentional falsification of the financial statements in order to misguide the reader about the organization. Asset Misappropriations: This kind of fraud includes misapplication of the assets owned by the organization. This also involves larceny of the resources belonging to the organization. Corruption: This crime takes place when the person committing fraud adopts unethical and immoral means of using its influential status in organization in order to achieve gains for itself or for the external forces in a wrongful manner. Statistics and data has shown than assets misappropriations that involves the wrongful utilization of assets of organization is the most common and frequently occurring crime out of the three fundamental categories. These kinds of frauds makes up almost 90 percent of the total frauds (Rollins & Lanza, 2004, p. 21) and 85% of are the frauds that include misuse or larceny of cash belonging to the organization. Other than this common category, frauds related to the corruption and wrongful utilization of a person's image and influence in order to procure any personal benefits are the second most common types of frauds. Though the percentage of occurrence of this type of fraud is less than the percentage of asset misappropriation however, it the ratio of occurrence is still very impressive that is about 30% of the total occupational frauds. This is because many a times the occupation frauds involve more than one category in its occurrence. Over the time, there is an increased potential in occurrence of the crimes related to occupational frauds. A report by the Association of Certified Fraud Examiners (ACFE) has showed that businesses and organizational setups in the United States lose an astounding figure of 7 percent of every dollar in gross due to occupational frauds (Blount, 2003, pp. 60-63). This figure makes up approximately $1 trillion per annum to the cause of occupational frauds. Nevertheless, the most frequent occurring and far-flung existence of the frauds related to theft and misuse of cash has made the researchers to dedicate their time and commitment in order to obtain a comprehensive understanding of the subject by focusing and concentrating on it in the first place. Studies and researches (Cipriani & Guarino, 2004) made in regard to risk management and particularly fraud related risk management has clearly showed that the phenomenon of globalization has ensued in rising opportunities and disclosing of new possibilities in the financial departments around the world. Globalization has bestowed the financial sectors with many of the blessings, implementation, and execution of technological resources in financial sectors across the globe being one of the most cherished blessings contributed by the phenomenon of globalization. However, the rule of thumb with greater power and potentials comes with greater risks and threats. It is the case with the organizations enjoying the benefits of financial computing that the organizations undergo severe threats of occupational frauds related to financial computing. The reason behind these threats is significant defects, critical loopholes, and potential risks connected to the methodology of financial computing used in organizations across the globe (UCL, 2009). In the last few decades, the theft of organizational assets and business revenues has increased greatly. On one hand, the advancement of technology and its implementation in every sector has benefited all the major areas of business including the financial sectors as well. However, on the other hand this advancement is open to potential risks of information theft, misuse of financial transactions, and misapplication of cash and assets of the business and organizational setup. There is no denial to the fact that technology has empowered financial business like never before but this power like fire damages the hander if not used efficiently and carefully. Over the years, the cases and crimes related to cash theft appear to consist of three basic types of cash theft crimes. The first type involves making the company accountable and liable for paying the fraudster by using wrongful means and unethical implementation of technology. This crime involves making of false time cards and invalid invoices that obliges the organization to pay. This kind of cash theft includes frauds like check tempering, payrolls, billing, and register disbursement etc. Moreover, the second most common type of cash theft by adopting inappropriate means of financial computing is skimming. This crime involves the making the clean sweep of cash during the cash collection process; however, the theft takes place before the records maintenance starts in the books of accounts. Many a times, it involves changing the records by using technological means. This changing of records of cash collection after the record maintenance is cash larceny (Silverstone & Sheetz, 2007, p. 13). This has given rise to the need of methods and techniques used to detect, identify, and find the various occupational frauds taking place in business organizations every day. Identifying the need of the time with regard to risk and threats involved in mechanism of financial computing in business organization, experts have made extensive studies (Ketz, 2006, pp. 89-93) by concentrating on identification, detection, protection, and prevention of occupational fraud crimes taking place in accounts sector of the organization across the globe. The researches made in this regard have clearly depicted the fact that no doubt implementation and execution of advanced technology has provided and rendered huge advantages and tremendous gains. However, it has always provided loopholes to allow potential threats and brought consequences of immense vulnerability and huge exposure of shortcomings giving rise to the risks and hazards of occupational frauds. Researchers (Ketz, 2006, pp. 89-93) have recognized the core reason behind the victimization of organizations with respect to occupational frauds, and the reason according to many of the researchers is the flaws in structure or shortcomings in effective implementations of technological means to protect, and favor the efficient working of the setup in any organization. However, experts (Kock, 2007, pp. 165-167) have shown by dint of extensive researches and in-depth analysis of these researches that there exist certain circumstances that are favorable to give rise to fraud index and make an individual capable of committing the crime of occupational fraud besides the reason of technological shortcomings and flaws in the system of financial computing. Experts (Kock, 2007, pp. 165-167) have shown existence of three keyholes that enable the penetration of any fraud or criminal activity into the organization. Although, there are numerous ways to commit fraud crimes in any organization however the three keys the parts of every successful fraud plan. These three keys are opportunity, pressure, and rationalization. The occupational frauds can penetrate into any organization when the individuals belonging to those organizations get the opportunity in order to make the most of it or the individuals undergo certain internal or external to the organization pressure or they have the ability to rationalize the situation using personal influence and reputation (Kock, 2007, pp. 165-167). Specific researches (Beenen & Pinto, 2009, pp. 275-289) done in this particular regard has showed clearly that most of the business organizations across the globe are now occupied in facing the challenges imposed by world recession and economical inflation on an international level. This irony has ensued in an exponential increment and huge growth in burdens and workloads in financial sector on CFOs. The result of this increased burden comes forward in the form of money embezzlement and cash misapplications. Money embezzlement is another most common form of assets misappropriation and due to the potential threat imposed by it; it is the chief consideration of risk management personnel and fraud identification and protection specialists. Apart from the implementation flaws and financial burdens across the globe, another significant point that gives rise to occupational fraud is the fact that with the advancement of financial computing and implementation of related information technology, the accounting professionals working in the financial sectors and accounts areas of the business acquire many chances to avail enormous golden opportunities, in order to commit occupational fraud and earn considerable fortune from it. The logical grounds behind this setup are the most fundamentals and basic errors and flaws in the rules and regulations of accounting imposed by the organization. The organizations mostly do not give much regard to occupational crimes while setting up the accounting operational plan and the rules and regulations related to it. In this way, the presence of ambiguities and loopholes in financial computing systems and related technological setups provides opportunities to individuals in order to involve themselves in committing occupational crimes for their own benefits and personal interests (Pickett, 2006, pp. 40-43). As stated earlier, occupational crimes is one of the major type of white-collar crimes, with the advancement of technology and increment of opportunities for individuals to be a part of this crimes has increased the ratio of white-collar crimes as well. A significant part of white-collar crimes belongs to the contribution done by different occupational frauds and issues related to it. This huge percentage is due to the fact that occupational crimes provides endless possibilities for people who are capable of committing immoral and unethical crimes and at the same time having the influence and potential to cover up and neutralize their unlawful and immoral practices (Beenen & Pinto, 2009, pp. 275-289). As discussed above, one of the major reasons of increased occupational crimes across the globe is the shortcoming and loopholes in the financial policies and rules and regulations of accounting sector. This factor not only promotes the cause of occupational crimes but also provides more opportunities to get involved in this unlawful and unethical practice. Due to the fact, the risk management specialists and anti-fraud personnel (UCL, 2009) gives more importance and consideration to identify flaws, and detect loopholes in accounting algorithms, and specifically shortcomings in computer systems belonging to finance departments in realization to their critical importance and utmost significance regarding the issues, and barring against occupational frauds in business and organizational setups. There is another very significant and substantial point with respect to the grounds of occupational fraud in any organizational setup. This critical factor is the lack of control or inability of controlling forces to get hold of the situation that in return provides numerous probabilities of unlawful and unethical activities. Therefore, the risk management specialists and occupational frauds experts accentuate this factor as it provide grounds for making and devising the plans for such immoral and unlawful practices. Hence, the risk management specialists always recommend a rigid control and strict monitoring in order to nip the evil in the bud. This allows the elimination of occupational frauds and related crimes from the roots and plays an important part in making the business or organizational setup, a fraud free organization. Experts (Beenen & Pinto, 2009, pp. 275-289) have indicated that there are other factors as well that affects the organization in terms of occupational frauds and related crimes. One of these factors is putting too much trust on the subordinates, this factor results in no fear in fraudster's mind and it commits the crime breaching the trust and code of ethics of the organization. Moreover, lack of financial audit is another significant factor that makes the organization vulnerable to potential risks and threats. Another important point of concern is that when there are no background checks on important and influential positions. Experts (Beenen & Pinto, 2009, pp. 275-289) of risk management accentuate on the presence of virtual check posts for the key position of the organizational and business setup. This saves the organizations from endangerment of employee embezzlement and other theft of assets resulting in organizational setups that provides no loopholes for penetration of occupational fraud or other related criminal activities. Deficiency of financial audits in an organizational or business setup also opens up several gates of opportunities to the individuals looking for shortcuts. This lack makes the organization exposed to the menaces and terrors of different occupational frauds and related crimes (McMillan, 2006, p. 06). There is no question to the importance and significance of ethical policies and moral regulations of any business or organizational setups. Ethical condition of any organization is very detrimental in calculating the potential risks and threats promoting occupational frauds and related crimes in any business or organizational setup. Organizations having ethics and morals as the higher priority are least likely to be affected by the hazards and endangerments of frauds. Similarly, an organization whose ethical and moral condition is worse and there is no regard for ethics and morality then the organization is most likely to result in a disaster. Realizing the magnitude of importance of ethics in any organization or business setup, the risk management specialist holds ethical policies of any organization in their top priority lists. The inability of maintaining ethical standards in any organization gives rise to occupational crimes and related issues in an exponential manner. This significance makes the ethical policies of any organization or business set up the most fundamental ground on which the organization stands without getting challenged my threats related to occupational frauds. Experts and researchers (Singleton, 2006, pp. 42-45) around the world have emphasized and accentuated on the effective and efficient ethical policies. According to them, ethical policies of an organization should be so strong and clear that it demotes all the risks and potential threats related to occupational and other frauds. Moreover, the devising of policies should be in the manner that aids risk assessment specialists and fraud detecting professionals in investigation and prevention of occupational frauds and related activities. The exponential increment in occupational frauds and related crimes has signified the importance of risk management professionals and forensic accountants in the financial department of any organizational or business setup across the globe. The services and part played by risk management specialists and forensic accountants is the savior for many organizations worldwide. Realizing the utmost significance in today's financial sector, the two professions are the most promising and important profession in the business and organizational setups and these professions are playing role in eliminating the possibilities and threats of occupational frauds and related criminal activities very efficiently and effectively (Mohay, 2003, pp. 19-22). Conclusively, the literature review has attempted to discuss some of the significant aspects of occupational frauds by analyzing different studies and viewpoints of experts of the field. It is an expectation that the review will be beneficial for students, teachers, and professionals in better understanding of the topic. References Beenen, G. & Pinto, J. (2009). “Resisting Organizational-Level Corruption: An Interview with Sherron Watkins.” Academy of Management Learning & Education. Volume 8, Issue 2. Blount, E. C. (2003). Occupational crime: deterrence, investigation, and reporting in compliance with federal guidelines. CRC Press. Cipriani, M. & Guarino, A. (2004). Transaction Costs and Informational Cascades in Financial Markets. Retrieved on December 24, 2009: http://www.cs.ucl.ac.uk/financialcomputing/docs/TransactionCosts.pdf Joshi, M. (2005). Occupational frauds and money laundering. Snow White Publications. Ketz, J. E. (2006). Accounting Ethics. Routledge. Kock, N. F. (2007). Encyclopedia of E-Collaboration. Idea Group Inc. Koletar, J. W. (2003). Fraud Exposed. John Wiley & Sons. McMillan, E. J. (2006). Policies and procedures to prevent fraud and embezzlement: guidance. John Wiley and Sons. Mohay, G. M. (2003). Computer and Intrusion Forensics. Artech House. Pickett, K. H. S. (2006). Enterprise Risk Management. John Wiley & Sons. Rollins, S. C., & Lanza, R. B. (2004). Essential project investment governance and reporting: preventing project fraud and ensuring Sarbanes-Oxley compliance. J. Ross Publishing. Silverstone, H. & Sheetz, M. (2007). Forensic Accounting and Fraud Investigation for Non-Experts. John Wiley & Sons. Singleton, T. (2006). Fraud Auditing and Forensic Accounting. John Wiley & Sons. UCL. (2009). Financial Computing and Quantitative Finance. Retrieved on December 24, 2009: http://www.cs.ucl.ac.uk/financialcomputing/key_themes.htm Wells, J. T. (2007). Corporate fraud handbook: prevention and detection. John Wiley and Sons. Read More