Question

How does an organization's size relate to its occupational fraud risk?

Answer 1

Occupational frauds are those frauds that are committed by the employees, officers or directors of the organization against the organization itself. It generally includes asset misappropriation, various corruption schemes and frauds relating to financial statements or risk relating to financial misstatements . These frauds are done in various types of organization like private company, public company, government company and even in not-for-profit organization irrespective of their size.

However, size of an organization do impact the frequency and the amount of frauds. For instance, smalerl organization (generally organization having less than 100 employees) do not have enough financial as well as other resources (manpower etc.) in order to implement various anti fraud measures or mechanism which ultimately increases the frequency of frauds in the absence of proper monitoring and observing process, thus, anything in such organization to prevent such frauds is the moral values of the employees and trust among each other. On the other hand larger organization generally have enough resources as well as proper processes established for performing each and every task which ultimately reduces the frequency of occupational frauds. However, it has been observed that in a too much bigger organization (which generally have more than 10000 employees) frequency of frauds may rise due to too many employees and lack of accountability .

Thus, clearly we can see that size of an organization plays an important role in terms of opportunity to commit fraud.