Report Provides Insight into the Plague of Occupational Fraud and Theft

A recent report by the Association of Certified Fraud Examiners revealed the breadth and scope as well as emerging trends in occupational fraud across the globe. From Ponzi schemes to data breaches and falsified expense reports, fraud poses a serious threat across all industries. Following is a sampling of the study's findings.

• It is estimated that the typical organization loses 5 percent of its annual revenue to fraud.
• Small organizations are disproportionately affected by occupational fraud; they often lack the anti-fraud controls of their larger counterparts.
• More than 85 percent of those committing fraud in the study had never been previously charged or convicted for a fraud-related offense.
• Fraud reporting mechanisms are an effective means of receiving tips from both internal and external sources. Fraud is more likely to be detected by tip than by any other means, including audit.
• Perpetrators often displayed warning signs, most prevalently living beyond their means and experiencing financial difficulties.
• Surprise audits can be useful in both uncovering fraud and deterring it by creating a perception of detection. Organizations generally rely on audits too much; in fact, external audits were the control mechanism most widely used by fraud victims in the survey. • Frauds lasted a median of 18 months before detection.
• Executive-level frauds, partially because of their extended detection time, proved to be three times as costly as those committed by managers and nine times those committed by employees.
• Ninety percent of fraud cases were a form of asset misappropriation, with a median loss of $135,000. Rare, but with a median loss of more than $4 million, are financial statement fraud schemes.

Taking steps to prevent occupational fraud through employee education and the institution of fraud reporting mechanisms could save your company serious loss. You should also review your insurance contracts to be sure you have the appropriate employee dishonesty coverage in place for your company.


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