Small companies need to be on their guard against rising levels of workplace fraud, according to research by PricewaterhouseCoopers and the Chartered Management Institute (CMI).

The survey revealed that 48% of companies have been victims of fraud and 30% admit they need to improve their cashflow management.

Despite this apparent vulnerability, nine out of 10 employees say they feel their boss doesn't trust them and just 8% say they have ‘sign-off' responsibility at work.

"Fraud can be stopped in the early stages if robust detection procedures are in place," says Petra Wilton, director of policy and research at the Chartered Management Institute.

"However, rather than focus on the checks and balances that they introduce, employers need to highlight the impact that fraud can have on individuals and the business. Failure to do so means that organisations run the risk of stifling employees if they believe they are being watched by ‘Big Brother'."

Rather than focus on the checks and balances that they introduce, employers need to highlight the impact that fraud can have on individuals and the business

The CMI has unveiled a guide called ‘Workplace Fraud: the enemy within', which provides a number of best practice principles for deterring and detecting internal fraud. These include:

  • Developing a fraud strategy statement: outlining what behaviour is and is not acceptable
  • Establishing an audit committee: to design fraud prevention measures and investigate allegations of malpractice
  • Making use of technology: to share information across the organisation in an effort to cross reference information and spot fraud more easily
  • Developing a culture where fraud is unacceptable: ensuring that from the top-down key messages are communicated and employees are made aware of reporting routes if they suspect a problem

The CMI is also urging employers to recognise that fraud is not just opportunistic, and that motivation for dishonesty is often rooted in the pressure caused by unrealistic targets or financial problems.

"Fraud is a major risk so organisations need to ensure that they have a robust fraud policy that is disseminated effectively and taken seriously throughout the organisation," added Gillian Lees, risk and governance specialist at the Chartered Institute of Management Accountants (CIMA).

The report can be downloaded from www.managers.org.uk/fraud