A Midland business adviser has warned companies to be more vigilant in combating fraud by employees as the recession forces hard-pressed staff to cut corners.

Guy Morgan, partner at accountants and business advisers Horwath Clark Whitehill, warned that the recession could force key employees to commit fraud.

"In an environment of weak controls an employee with an incentive to break the law may be able to rationalise his or her fraudulent behaviour," he said.

"The temptation becomes greater if we add to this the employee's competence - or power based on greater autonomy - and arrogance from a belief that corporate policies and procedures do not apply to him or her."

Mr Morgan said that fraud could happen anywhere, but there was now an increased expectation on corporations to have in place a structured approach to manage the threat.

There were three steps to design a more rigorous approach to help stop fraudulent activities.

·        Understand your unique risk profile

·        Establish an anti fraud culture

·        Phase-in a direct response to fraud

Mr Morgan said that once a better understanding of the risk of fraud in an organisation had been defined, senior management could add prevention and detection methods to head it off.

"The right balance and design of internal controls, together with more consistent testing of their effectiveness will limit the opportunity to hide the fraud trail and reduce employee confidence to commit fraud."

He said employees should be familiar with corporate protocol to know where to turn when they suspect fraud.

"Top down direction, clear policies and procedures, ethics training, whistle blower hotlines and competent and independent internal auditors can all help to put us on the front foot when it comes to fraud prevention."