Working with companies who have been victims of fraud on a regular basis, the report provided by the Association of Certified Fraud Examiners for 2014, hits the nail on the head.
Here is a summary of their findings:
- Typical organization loses 5% of revenue each year to fraud.
- Median loss in their study was $145K.
- Median duration before being detected was 18 months.
- Occupational frauds are classified into 3 categories: asset misappropriations, corruption and financial statement fraud. Of these, asset misappropriation was the most common, occurring in 85% of the cases.
- Tips are consistently the most common detection method.
- Approximately 77% of the frauds in the study were committed by individuals working in one of the seven departments: accounting, operations, sales, executive/upper management, customer service, purchasing and finance.
Conclusions & Recommendations:
- Universal problem
- The longer the frauds last, the more financial damage it causes.
- Small businesses are at higher risk and under-protected by anti-fraud controls. Several anti-fraud controls – such as an anti-fraud policy, formal management review procedures and anti-fraud training for staff members – can be enacted with little direct financial outlay and thus provide a cost-effective investment for protecting these organizations from fraud.
- External audits are the least effective controls in combating occupational fraud.
- The vast majority of occupational fraudsters are first-time offenders.
- Occupational fraudsters exhibit certain behavioral traits such as living beyond their means, or unusually close associations with vendors or customers.
For a link to the complete report, click here.
The amazing thing about fraud, is that you can greatly reduce your risk by simply implementing specific policies and procedures at a low cost. Implementing internal controls and establishing a fraud hotline are great places to start. For more suggestions, give our office a call, we’d be happy to help you.
By: Kim Onisko