Occupational Fraud Costing U.S. Organizations 7% of Revenues, Examiners Report

July 15, 2008

U.S. organizations lose an estimated seven percent of their annual revenues to fraud by accountants, managers and other employees, according to a survey of fraud examiners who investigated cases between January 2006 and February 2008.

The median loss caused by the occupational frauds in this study was $175,000. More than one-quarter of frauds involved losses of at least $1 million.

The seven percent figure translates to approximately $994 billion in fraud losses.

The study also found that schemes frequently continue for years before they are detected. The typical fraud in the study lasted two years from the time it began until the time it was caught by the victim organization.

The Association of Certified Fraud Examiners (ACFE) published the results of the survey in its 2008 Report to the Nation on Occupational Fraud & Abuse.

The benchmarking data is compiled from 959 cases of occupational fraud that were investigated between January 2006 and February 2008.

The report also found that:

Frauds were most often committed by the accounting department or upper management, and most fraudsters were first-time offenders. Only seven percent of fraud perpetrators in the study had prior convictions and only 12 percent had been previously terminated by an employer for fraud-related conduct.

Occupational frauds are much more likely to be detected by a tip than by audits, controls or other means.

Small businesses are especially vulnerable to occupational fraud.

Seventy-eight percent of victim organizations modified their anti-fraud controls after discovering that they had been defrauded.

The report also details findings such as how organizations were impacted based upon industry, how the implementation of anti-fraud controls affected exposure to fraud, and the most common behavioral traits observed among fraud perpetrators. A copy is available on the ACFE’s Web site.

Source: ACFE

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