Concerned about employee fraud? Discover the red flags & steps you can take to prevent it

Employee fraud: identify the warning signs

There are some tell-tale signs of an employee who has committed fraud or is thinking about it. 

For instance, he or she may have something to hide and act suspiciously, become defensive or behave more secretively. 

One common clue is if an employee doesn’t want to take a contracted leave. This can be due to fear that someone else might take over their work and discover the fraud. 

Another way to hide fraud is by claiming a lottery win or a “windfall” like an inheritance to explain their new financial status.

Other warning signs are employees who are struggling with debt, those with a history of drug abuse, and those involved in high-risk investments. 

To prevent employee fraud: 

If there is suspicious behaviour, take a closer look at the employee’s conduct.

Avoid excessive employee control

Be vigilant of employees who exert a little too much control or are more interested in certain aspects of their role. 

For instance, if an employee needlessly works long hours or does specific job functions and refuses to share tasks should be a red flag.

When an employee is solely in charge of deals with specific suppliers or vendors, it is a common breeding ground for fraud. 

This is called ‘purchasing fraud’ and usually involves inflating invoices with the employee arranging payment and splitting the difference with the supplier or vendor. 

To prevent employee fraud: 

Avoid providing too much power or control for individual employees when dealing with suppliers.

Prevention is better than cure for employee fraud… 

You should stay on the lookout and be vigilant. Make sure you monitor and control your financial records and note any discrepancies. 



Mismatched payees, questionable companies with unprofessional invoices, or identical payments cleared for similar amounts are huge red flags.

But prevention is always better than a cure for employee fraud. 

Ensure that your bookkeeping is updated regularly and that you are doing reconciliations of bank accounts and credit cards. 

That should help you avoid many of the above scenarios. 

Ascent Accountants can help with any of your questions about effective bookkeeping and preventing employee fraud. 

Call us on 08 6336 6200 and we can help you introduce internal controls to prevent fraud.