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