What is Accounting Fraud and what are the most common cases?

accounting fraud

Thanks to a survey carried out by the ACFE (Association of Certified Fraud Examiners) in which the main auditing firms in the world participated, we know that there are a series of patterns that are repeated in most cases of accounting fraud.

These are actions in which the trust of a person or organization is violated in order to profit, obtain money, services, or goods, under improper circumstances.

In today’s article we will see how accounting fraud affects companies, in addition to classifying the most common types of financial fraud and the importance of accounting services colombia.

How does Accounting Fraud affect companies?

If there is one thing that all types of accounting fraud have in common, it is that they are capable of causing serious damage to companies, being today one of the greatest risks to avoid when running a company.

We have an example with fraud related to corporate expenses, which usually generate serious problems both among employees of the same company, as well as serious economic problems for the same. This almost always ends up destroying trust between employees and managers, creating an atmosphere of tension that is not recommended for the proper functioning of the company.

Unfortunately, these accounting frauds linked to corporate expenses are one of the most common types of fraud that we can find today, but they are not the only ones by far.

All accounting fraud entails capital losses for the company, the amount of which varies depending on the size and activity of the company in which the fraud is carried out, and may involve losses of thousands of dollars or, in more serious cases, even millions of dollars a year.

How to detect accounting fraud?

Expense control, reimbursement and financial information are part of the day to day of any company, whether it is an SME or a corporation with offices around the world.

It is important to ensure that the management of all expenses is a consistent and effective method. It implies having controls to immediately detect irregularities such as accounts not accumulated, leaked or transactions that are not transparent or incomplete.

The ACFE (Association of Fraud Certifiers) has made a statement on this issue, warning that 90% of professionals dedicated to corporate finance agree that the uncertainty created by COVID-19 will continue to increase fraud alerts related to business expenses. In this regard, Andi McNeal, Head of Research at ACFE, recently spoke, providing us with the data that the increase in the types of fraud within the company has increased by 79% since 2020.

How to detect accounting fraud?
Expense control, reimbursement and financial information are part of the day to day of any company, whether it is an SME or a corporation with offices around the world.

How to prevent accounting fraud?

In order to prevent the accounting fraud that generates so many problems in time, it is important that our company complies with the following conditions:

1.- Companies must adapt as quickly as possible to the procedures required in the audit and control policies.

2.- Establish in the company the so-called culture of regulatory compliance, which implies compliance with the rules within the company.

3.- Integrate technological mechanisms that are effective in controlling fraud in our company.

If you are looking for a solution for your company, there are very good automation systems based on artificial intelligence that are capable of helping us when carrying out an expense audit and that promote financial standards, as well as the best practices to be carried out for the business.

Thanks to automation systems we will be able to:

  1. Carry out simplified processes: this allows us to automatically detect possible fraud, errors or incorrect schemes.
  2. More control and visibility: All financial elements are displayed in order to optimize date validation, comparison of data and suppliers, cross-referencing between services and elements, as well as other important factors.
  3. Lower Risk Returns: Automatic sale approval on lower risk items and restrictions on large orders for added protection.
  4. Accidental Usage Detection: Allows for better tracking, optimized financial planning, and timely addressing of risky situations that may arise.

In short, fraud prevention today requires the adoption of technological solutions that are truly effective for companies, since without them we would not be able to process large amounts of data, identify errors quickly and easily, in addition to avoid financial losses.


Most common cases of accounting fraud

To finish, we will see the different types of financial fraud that are most common today:


  1. Tax evasion: Including the omission of tax returns or the provision of false information to reduce the amount of tax to be paid.
  2. Deviation of transactions: Changing the course of a transaction that is profitable for a business is another type of financial deception.
  3. Conflict of interest: When an officer, director or employee withholds important information for personal or financial benefit, it is also considered a type of fraud.
  4. Fictitious or Inflated Expense Fraud: This is fraud in which an employee or manager submits false statements or falsifies invoices in order to claim reimbursement for travel, fuel, and other expenses that do not actually exist.
  5. Payroll Fraud: This type of fraud occurs when payments are correctly identified based on false claims. For example, in the case of a worker claiming payment for overtime not worked, or an increase in staff with non-existent workers.
  6. Skimming: It is a type of fraud that occurs when an employee or director does not report sales income in the accounting books.
  7. Financial reporting fraud: This fraud occurs when trusted managers or employees provide false information about a company’s financial statements. This is often due to high income expectations that are not met, exaggeration of expenses and liabilities, commission payments, hidden sales and more factors.
  8. Embezzlement of funds and flows: It occurs when there is the theft of cash or property of a business. May include unusual inventory management, disposal of equipment and supplies, changes to records, and more.
  9. Bribery and Corruption: Personal gain through fraudulent means based on hospitality or solicitation of favors to key employees and officials is another form of fraud against businesses and organizations.
  10. Disbursement fraud: This is another method in which payments are requested from companies that do not really exist or that do not carry out any real activity. This also includes virtual payments for medical claims, unemployment insurance, pension collection through identity theft, and many other crimes.