79% of employees steal from their employer
YORK, Aug. 11, 1999: Michael G. Kessler & Associates, Ltd. the
leading international investigative and forensic accounting firm
specializing in corporate issues affecting today’s workplace, has
recently completed an exhaustive study surveying over 500 employees
nationwide on the issue of employee theft in the work place. The
results of the study turned up some astounding facts that will clearly
surprise many business owners and management level employees.
employee loyalty is what every business owner strives for, whether
he is operating a three-person firm, or a one hundred fifty thousand
person corporation, employee loyalty may in fact be a tip off to
a more serious internal problem.
results showed that extreme employee loyalty may in fact be a guise
to extreme employee dishonesty. Employees that appeared to have
the company’s best interest in the forefront of their activities
were often just using this ploy to steal from the company.
studies showed that not only do employees steal, but also they outsteal
shoplifters. In fact, employee theft is the cause for one out of
every three business failures in this country today. Our study disclosed
that employees readily admitted to stealing office supplies, falsifying
expense reports, taking inventory and almost 87% of those surveyed
admitted to falsifying time sheets because they regularly stole
time from their employers and was paid for hours they did not work.
Those surveyed also indicated that these practices are increasing
at an alarming rate. Previous studies have revealed that the price
tag on employee theft in this country today is over $120 billion
Loyalty is not Always a Good Thing
easiest way for an employee to perpetrate the theft is by a show
of extreme loyalty. For example, if an employee never takes a vacation,
if they appear at work no matter how physically ill they may be,
or if they are the only person in the company that can perform their
duties, the employer needs to step back and examine his internal
organization. These practices do not positively prove that an employee
is stealing, but they do, however, set the stage for the theft to
will never steal from employer
will steal from employer
will steal if they see others do so without consequence
study revealed some disturbing facts. We documented that only about
21% of employees are basically honest and will never steal, 13%
are dishonest and will undoubtedly attempt theft, and the remaining
66% will steal if they see others doing it without repercussion.
This statistic proves the disastrous results that will occur if
an employer senses that theft is occurring, but buries his head
in the sand to avoid accusing the culprit.
is often difficult for an employer to believe what the facts spell
out, especially if the employee has presented himself as a hard
working loyal member of the staff. Long term employees who are personable,
never take off from work, and perform their duties in an above average
manner, may in fact be the impetus that will drive a company out
of business. Although for many an employer, these are the hardest
individuals to accuse of such a crime.
our study among the participants we questioned were employees who
admitted to stealing from their present or former employers. Yet
few of these employees, less than 5%, had a criminal record of any
kind for any theft-related offense. So we asked them to tell us
the reasons behind their theft and "What made an otherwise
loyal and honest individual feel the need to steal when placed in
a work environment?" The answers varied and provided some insight
into how, as an employer, to avoid the pitfalls that are often the
impetus for theft.
Steal due to Greed
Steal due to Vindictiveness or need to get even for poor treatment
Steal due to Need
some questioned the reason for their theft was pure greed. For others
it was vindictiveness, or a need to get even with their boss, or
firm, for injustices thrust upon them. And for a small percentage
it was need.
an employer makes theft too easy then he is setting himself up for
the crime. If an employer treats his employees with little respect
an employee may go the extra step to perform the crime as a payback
for the humiliation he may be forced to endure. If an employee has
a serious problem, (i.e. financial, gambling, death or illness)
within his family and he has no where to turn for help or guidance,
he may be forced to take matters into his own hands to solve his
existing problem, by pilfering from the firm.
also learned that most employees (92%) would lie on their job applications
if asked "they ever stole from a previous employer" and
more than two thirds (68%) stated that they would not disclose on
a job application that they were discharged due to theft.
other significant forms of employee theft that we encountered throughout
our study were the theft of time and computer related thefts. This
not only includes the theft of computer hardware and software, a
crime which has increased dramatically within the past five years,
but also includes theft in terms of time stolen from the employer
by employees surfing the INTERNET for non personal reasons.
many firms utilize the resources of the INTERNET for business purposes,
many employees told us they pretend to be utilizing the INTERNET
for work purposes when in reality they are using it for personal
gain or pleasure.
an employer you can not always prevent these occurrences, but, as
shown by our study, you can help minimize the chance of such incidents
occurring by adhering to the following steps:
Do not bury your head in the sand, if you have any indication that
might be occurring immediately investigate.
Provide a strict written policy on dealing with employee theft.
mind that if the theft of $30,000 only results in the loss of a
$20,000 a year
job, it is probably a poor deterrent.
Vigilantly follow through on written procedures. If the employee
manual calls for criminal prosecution of employee theft and it is
carried through, it is setting a poor example to the rest of the
Be sure your firm has an internal checks and balance system so that
one employee has the authority to write checks or process incoming
payments to the company.
5. Provide a grievance process for employees which will allow
them a fair
representation if they feel they have been treated poorly.
Thoroughly screen all new employees before bringing them onboard.
This may not prevent all acts of thievery, but knowing as much as
can about an individual before hiring them will cut down the cases
Else Can You Do
know something isn’t right. There is no concrete proof that a problem
exists, but you get the feeling that something is amiss. Is it just
undue suspicion, paranoia maybe, or is there reason for your fears?
More than likely if you, as the owner or manager in a business,
start to feel that something is wrong you should trust your instincts.
Employee fraud and misconduct is often a difficult crime to prove
and more often a difficult crime to accept. This is especially true
when the suspect is a long time member of the firm and someone that
you previously trusted with the well being of your organization.
in mind that employee theft is responsible for one out of three
business failures in this country. 79% of all employees have the
capacity to steal, which is evidenced by the numbers that place
employee theft at $120 billion dollars a year.
however have listed below several of the red flags to be on the
lookout to spot fraud before it becomes a major hindrance to the
financial outlook of your organization.
you can answer yes to two or more of the questions listed below,
further investigation is necessary to protect your assets and your
peace of mind.
the employee never call in sick regardless of how physically ill
the employee never requested or taken a vacation while employed
by your firm?
there been excessive complaints rendered upon one employee?
there reports of an employee who is frequently ridiculing the firm?
an employee’s lifestyle suddenly greatly improved with no explanation?
all accounting matters handled by one individual with no system
of checks and balances?
there missing deposit slips or checks within bank reconciliation’s?
you own a retail business, are there excessive voided sales slips?
records or documents suddenly missing and untraceable?
there excessive credit memos?
certain customer’s names frequently showing up as having received
the general ledger out of balance?
duplicate payments found in the ledger?
excessive purchases being made of items you don’t need?
adjustments to receivables or payables frequently found in your
there excessive cash transactions found in expense accounts?
the firm experiencing inventory shortages above normal shrinkage?
there alterations on employee time sheets, after supervisors have
there frequent shipments to Post Office Boxes?
shipping destinations other than the business address?
unreasonably large quantities of supplies ordered?
weekend or holiday delivery dates shown on the invoices?
delivery dates appear that do not conform to vendors usual pattern
the same individual sign the purchase order and the receiving report?
goods delivered by a vendor other than the one from whom the merchandise
some vendors paid on a preferential basis?
invoices not properly canceled to avoid duplicate payments?
there unusual markings on invoices?
the sales tax rate charged on invoices not the same as the rate
in the country in which the business is located?
invoices appearing which are copies and not the original?
handwritten invoices being paid?
some invoices appear to lack the proper letterhead?
invoice totals round dollar amounts?
many of these occurrences can often be legitimately explained, if
several of them appear to be present within your firm it may require
that you begin an investigation. Internal investigations of this
nature are often difficult to handle. Employing the services of
an outside firm that specializes in Forensic Accounting is the only
way to guarantee a swift and thorough resolution to a very difficult
you answered yes to two or more of the above questions, call us
today at (212) 286-9100. We will provide you with a free consultation
and help prevent your firm from becoming one of the dismal statistics
G. Kessler & Associates, Ltd., is the leading internationally
renowned investigative firm specializing in Forensic Accounting.
The Kessler team does not stop with the identification of fraud;
they will determine how the fraud occurred so you may protect yourself
from future occurrences and help you recover any funds that were