Study Says Organizations Lose 5% of Revenues Annually Due to Fraud
Occupational fraud is a hazard of conducting business. Findings from the biannual Association of Certified Fraud Examiners (ACFE) Report to the Nations on Occupational Fraud and Abuse remind us that organizations must be proactive and vigilant when it comes to preventing fraud.
Here are some key findings from the report's executive summary:
- Asset misappropriation is the most common form of occupational fraud. Examples include falsifying wages, overstating expenses, fictitious expenses and check tampering.
- Organizations with active detection methods, or a fraud prevention strategy, had a lower median loss and lower median scheme duration than organizations that learned of the fraud via accidental discovery or police notification. Organizations with anti-fraud controls were able to reduce fraud losses 14%-54% and detect the frauds 33%-50% more quickly.
- Enacting internal controls specifically designed to prevent and detect fraud is a vital part of a fraud risk management program.
- No matter the size of your organization, there’s a fraud risk; however, the type of fraud committed is likely to be different. Smaller organizations are more likely to be victims of check tampering, skimming, payroll and cash larceny schemes, while corruption (conflicts of interest, bribery, illegal gratuities or economic extortion) is more prevalent in larger organizations.
- Organizations cannot rely solely on external financial statement audits as a control because they are not specifically designed to find fraud. External audits are responsible for detecting less than 4% of frauds. The most common fraud-detection method is tips (39%), followed by internal audit (16.5%).
If you’d like to read more of the findings, download a copy of the ACFE report. To learn more about how we can assess your risk for occupational fraud, request our complimentary fraud prevention assessment.
Stay tuned for our review of recent occupational fraud cases in our region and how they mirror the ACFE report in an upcoming online St. Louis Business Journal article.
To discuss fraud prevention for your organization, contact Ron Steinkamp, Partner, Advisory Services, at 314.983.1238 or email@example.com.