Essay Undergraduate 649 words

Occupational Fraud Prevention in Small Business Accounting

~4 min read

Abstract

This paper reviews key themes from Nilsen's (2010) article "Keeping Fraud in the Cross Hairs," published in the Journal of Accountancy. Drawing on findings from the Association of Certified Fraud Examiners, the paper examines the prevalence of occupational fraud, the role of the fraud triangle — particularly opportunity — in enabling fraudulent behavior, and why accounting departments are especially vulnerable. It discusses asset misappropriations and billing schemes as common fraud types, and outlines preventive measures including employee education, anonymous reporting hotlines, enhanced vendor controls, and emerging software technologies such as textual analytics. The paper emphasizes that fraud prevention is most effective when employers and employees collaborate.

📝 How to Write This Type of Paper Writing guide — click to expand

▼

What makes this paper effective

The paper grounds its claims in a specific, cited source and uses statistics (e.g., 80% of asset misappropriations are cash-related, 85% of firms earn under $5 million) to support its analysis.
It moves logically from defining the problem, to identifying causes, to proposing solutions — a clear problem-solution structure that aids reader comprehension.
The paper offers brief critical commentary on the source article (e.g., noting that the fraud triangle's other two elements are not fully explained), demonstrating evaluative rather than purely descriptive engagement.

Key academic technique demonstrated

This paper demonstrates source-based critical analysis: the writer does not simply summarize Nilsen (2010) but evaluates its strengths and gaps, such as pointing out that the article fails to define all three elements of the fraud triangle or explain the specific controls in the accounting department. This evaluative stance distinguishes a strong review from a basic summary.

Structure breakdown

The paper opens by establishing the broad scope of occupational fraud using ACFE data, narrows to the specific vulnerability of small businesses, then examines the fraud triangle and accounting department risk. It proceeds through types of fraud (asset misappropriation, billing schemes) before concluding with practical prevention strategies. Each section builds on the previous, maintaining a focused analytical thread throughout.

Introduction: The Scope of Occupational Fraud

Fraud continues to pervade the accounting industry. A study conducted by the Association of Certified Fraud Examiners (2010) found that fraud — in terms of losses, schemes, detection methods, and perpetrators of occupational fraud — was broadly consistent across six studies. With the inclusion of international data, the study also found that fraud problems plagued non-U.S. companies as well. It is estimated that five percent of annual income is lost to fraud. Nilsen's (2010) article "Keeping Fraud in the Cross Hairs" briefly examines the causes of fraud and the steps that may be implemented to prevent it.

Small Businesses and Fraud Vulnerability

Although large financial frauds have garnered the most attention in the media, these cases comprise only 15% of U.S. financial companies. The remaining 85% of companies generate less than $5 million in revenue and are the most vulnerable to occupational fraud. The majority of CPAs are not auditing multi-million dollar companies and are therefore more likely to detect fraudulent schemes within small businesses.

The Fraud Triangle and Accounting Department Risk

Opportunity is one of the key elements of the fraud triangle and serves as a primary gateway for fraud. The other two elements of the fraud triangle are not clearly defined in the article; their inclusion would help readers better understand how the model functions as a whole. Joseph T. Wells (2010) notes that the greatest opportunity for fraud exists within the accounting department, where controls are strongly enforced, yet he does not explain what those controls are, nor does he address their vulnerability or long-term sustainability.

The reason the accounting department is particularly susceptible to fraud is that employees within it understand what controls are in place, how they are enforced, and — critically — how to circumvent them.

2 Locked Sections · 250 words remaining

Asset Misappropriations and Billing Schemes · 130 words

"Cash theft and fake vendors dominate fraud types"

Fraud Prevention Strategies · 120 words

"Education, hotlines, and software deter fraud"

Conclusion

Fraud prevention is most effective when a company and its employees collaborate. When employees are made aware of the repercussions of fraud and how it affects job costs, raises, reputations, and individual integrity, they become active participants in deterrence. Combined with advances in detection technology, a culture of accountability offers the strongest defense against occupational fraud.

You’re 51% through this paper. Sign up to read the remaining 2 sections.

130,000+ paper examples AI writing assistant Citation generator Cancel anytime

Key Concepts in This Paper

Fraud Triangle Occupational Fraud Asset Misappropriation Billing Schemes Small Business Risk Accounting Controls Anonymous Hotlines Fraud Detection Textual Analytics ACFE Research