Employee Theft Is Rampant: 5 Signs It's Happening

By Jonathan R. Tung, Esq. on August 08, 2016 | Last updated on March 21, 2019

By some accounts, about 75 percent of employees steal from their employers. As in-house counsel, you might find yourself in the uncomfortable position of having to advise your client as to why some numbers aren't matching up. Could it be that someone in the company is walking out with the goods? Could be.

Fraud Expert Findings

According to the Association of Certified Fraud Examiners, your typical organization loses approximately five percent of its revenue to fraud with the median amount being $120,000.

Two things jump out from that number. One, a median loss of $120,000 strongly indicates that solo firms and other small business are largely not represented in the distribution curves. If $120,000 is the most common loss number, this would pretty much obliterate any small operation. That's the good news. By the way, the average loss was $2.7 million.

However, this suggests that loss due to employees is actually far higher than many would care to admit. Even a number that is far lower for smaller operations could potentially be ruinous.

What Is Fraud?

There are a lot of employee behaviors that many people would be reticent to categorize as "theft" of company property, e.g., inadvertent taking home of pens or bringing home company refreshments. Both lawyers and lay persons are inclined to attach a certain deliberateness when bandying about the words "theft" and "fraud."

But in the end, what does it really matter? A loss from employees is a loss either way. Good principles of accounting doesn't care if lost property was done maliciously or inadvertently. The job of in-house counsel is to help staunch the bleeding.

5 Signs of Employee Theft

Keep an eye out for the following five signs:

  1. Shortages in petty cash or other investments
  2. Abnormal and non-routine charges
  3. Routine charges
  4. Splashy purchases by employees
  5. Inventory shortages

As in-house counsel, you already knew this list. In essence, conduct due diligence and employ best practices. Advise your client to tighten internal controls and to maintain a watchful but non-oppressive atmosphere within the workplace. Often, the interview process itself will help reduce losses.

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