Report to the Nations and how it may help your business

As members of the Association of Certified Fraud Examiners (ACFE), my partner, Robert Abner, and I have access to an enormous amount of resources concerning fraud.  The ACFE has published the 2010 Report to the Nations.  The Report summarizes its Key Findings and Highlights which are listed below:
The Impact of Occupational Fraud
•    Survey participants estimated that the typical organization loses 5% of its annual revenue to fraud. Applied to the estimated 2009 Gross World Product, this figure translates to a potential global fraud loss of more than $2.9 trillion.
•    The median loss caused by the occupational fraud cases in our study was $160,000. Nearly one-quarter of the frauds involved losses of at least $1 million.
•    Small organizations are disproportionately victimized by occupational fraud. These organizations are typically lacking in anti-fraud controls compared to their larger counterparts, which makes them particularly vulnerable to fraud.
Fraud Detection
•    The frauds lasted a median of 18 months before being detected.
•    Occupational frauds are much more likely to be detected by tip than by any other means. This finding has been consistent since 2002 when we began tracking data on fraud detection methods.
Perpetrators of Fraud
•    High-level perpetrators cause the greatest damage to their organizations. Frauds committed by owners/executives were more than three times as costly as frauds committed by managers, and more than nine times as costly as
employee frauds. Executive-level frauds also took much longer to detect.
•    More than 80% of the frauds in our study were committed by individuals in one of six departments: accounting, operations, sales, executive/upper management, customer service or purchasing.
•    More than 85% of fraudsters in our study had never been previously charged or convicted for a fraud-related offense. This finding is consistent with our prior studies.
•    Fraud perpetrators often display warning signs that they are engaging in illicit activity. The most common behavioral red flags displayed by the perpetrators in our study were living beyond their means (43% of cases) and experiencing financial difficulties (36% of cases).
For information about the Association of Certified Fraud Examiners, visit their website: http://www.acfe.com/home.asp
For details on how our firm can help your business with fraud detection, please contact our office.
/posted by Billy Upchurch, CPA/ABV/CFF, CFE, CVA