Strong relationships with your leadership team are an asset — until they become a blind spot. The executives you rely on most also tend to have the greatest access to your finances, the most influence over your staff, and the clearest path to overriding the controls designed to stop them.
Occupational fraud at the top of an organization is rare, but when it happens, the consequences are severe. Here's how to stay protected without sacrificing trust.
According to the Association of Certified Fraud Examiners’ (ACFE’s) Occupational Fraud 2026: A Report to the Nations, owners and executives account for 16% of all occupational fraud perpetrators. Yet they cause nine times the median loss associated with nonmanagerial fraudsters. Even if you trust your leadership team, strong safeguards can help protect your business and its reputation.
Why it happens
Forensic accountants commonly use the “fraud triangle” to understand occupational fraud. It focuses on three factors that generally need to be in place for people to steal from their employers: pressure, opportunity and rationalization.
Pressure can be personal or professional. An executive facing financial difficulties or aggressive performance targets may be tempted to manipulate financial results. The ACFE found that perpetrators experiencing excessive organizational pressure are associated with a median fraud loss of $532,000 — the highest among the behavioral warning signs identified.
Opportunity exists when someone has the access or authority to commit and conceal wrongdoing. Executives pose an elevated threat because they may approve transactions, influence employees, or override established procedures. More than half of the ACFE report’s cases involve either inadequate or overridden controls.
Rationalization occurs when perpetrators can justify their dishonest behavior. Executives might, for example, believe they’re entitled to steal because their compensation is inadequate or that manipulating results is acceptable because it will eventually benefit the business.
You can help reduce fraud risk by keeping this triangle in mind and promoting an antifraud culture. For instance, try to set realistic, achievable performance goals and intervene if executives seem excessively entitled or secretive.
Strengthen safeguards at the top
Internal controls that protect key functions — such as your accounting, and shipping and receiving departments — are also essential. But preventing executive fraud may require additional measures. For example:
- Establish clear rules for overriding controls, including requiring a second approval and documentation explaining why the exception is necessary,
- Mandate fraud awareness training for employees, including executives,
- Conduct management reviews, surprise audits and financial monitoring activities, and
- Offer tiplines or web portals that enable employees to anonymously report suspected wrongdoing.
Reporting systems are especially important because tips remain the most common way to detect occupational fraud. The 2026 ACFE study found that 43% of cases are uncovered through tips, and employees provide more than half of them (other tips come primarily from vendors and customers). Because of the risks of retribution, confidentiality is critical if you want workers to blow the whistle on crooked executives.
Allegations involving a senior executive or other influential individual may warrant engaging an independent fraud specialist to help ensure an objective investigation, including evidence gathering and witness interviews. If fraud is confirmed, your organization should respond based on the circumstances, applicable laws and its own policies, not the perpetrator’s position.
Promote accountability
Protecting your organization from executive fraud isn't about distrust — it's about good governance. The right controls, training, and reporting systems send a clear message: accountability applies to everyone, regardless of title. That culture of transparency doesn't just deter fraud; it strengthens your organization from the inside out. If you're unsure where your vulnerabilities lie, contact your Rudler, PSC advisor at 859-331-1717 help you take a closer look and put the right protections in place before a problem arises.
RUDLER, PSC CPAs and Business Advisors
This week's Rudler Review is presented by Josh Byers, Senior Accountant and Becca Thorman, CPA, CVA.
If you would like to discuss your particular situation, contact Josh or Becca at 859-331-1717.
As part of Rudler, PSC's commitment to true proactive client partnerships, we have encouraged our professionals to specialize in their areas of interest, providing clients with specialized knowledge and strategic relationships. Be sure to receive future Rudler Reviews for advice from our experts, sign up today !