Occupational Fraud: Major report released by US Association
by Judy Hinz - Online Editor
The US-based Association of Certified Fraud Examiners has released its latest report titled Report to the Nations on Occupational Fraud and Abuse into the growing problem of occupational fraud. For the first time, the report includes an analysis of fraud cases from more than 100 countries worldwide.
The study is based on data obtained from 1,843 cases of occupational fraud that occurred worldwide between January 2008 and December 2009. All information was provided by the Certified Fraud Examiners (CFEs) who investigated those cases. The fraud cases came from 106 nations, with more than 40% of cases occurring in countries outside the United States.
Survey participants estimated that the typical organisation loses 5% of its annual revenue to fraud.
Applied to the estimated 2009 Gross World Product, this figure translates to a potential total fraud loss of more than US$2.9 trillion.
The median loss caused by the occupational fraud cases in our study was US$160,000. Nearly one-quarter of the frauds involved losses of at least US$1 million. The frauds lasted a median of 18 months before being detected.
Asset misappropriation schemes were the most common form of fraud in the study by a wide margin, representing 90% of cases - though they were also the least costly, causing a median loss of US$135,000.
Financial statement fraud schemes were on the opposite end of the spectrum in both regards: these cases made up less than 5% of the frauds in our study, but caused a median loss of more than US$4 million - by far the most costly category. Corruption schemes fell in the middle, comprising just under one-third of cases and causing a median loss of US$250,000.
Occupational frauds are much more likely to be detected by tip than by any other means. This finding has been consistent since 2002 when the Association first began tracking data on fraud detection methods.
Small organisations are disproportionately victimised by occupational fraud. These organisations are typically lacking in anti-fraud controls compared with their larger counterparts, which makes them particularly vulnerable to fraud. The industries most commonly victimised according to the study were the banking/financial services, manufacturing and government/public administration sectors.
Anti-fraud controls appear to help reduce the cost and duration of occupational fraud schemes. The study looked at the effect of 15 common controls on the median loss and duration of the frauds. Victim organisations that had these controls in place had significantly lower losses and time-to-detection than organisations without the controls.
Go to http://www.acfe.com/ to download the full report or download from the Case Studies section of this site.