Page 116 - ACFE Fraud Reports 2009_2020

Executive Summary

This study is based on data compiled from 1,134 cases of occupational

fraud that were investigated between January 2004 and January 2006. In-
formation from each case was reported by a Certified Fraud Examiner who
investigated the case.

• • Occupational fraud schemes can be very difficult
to detect. The median length of the schemes in our
study was 18 months from the time the fraud began
until the time it was detected.

• Our data supports the use of confidential hotlines
and other reporting mechanisms as a fraud
detection tool. Occupational frauds are more likely
to be detected by a tip than by other means such
as internal audits, external audits or internal
controls. The importance of encouraging tips is
Approximately one- evident in cases involving losses of $1 million or
fourth of the frauds in more. Forty-four percent of the million-dollar frauds
this Report caused at in this study were detected by tips. This is more than
least $1 million in losses. twice the rate of detection by internal audits and
three times the rate of detection by external audits.

• Occupational fraud and abuse imposes enormous • Certain anti-fraud controls can have a measurable
costs on organizations. The median loss caused by impact on an organization’s exposure to fraud.
the occupational frauds in this study was $159,000. In the cases we reviewed, organizations that had
Nearly one-quarter of the cases caused at least $1 anonymous fraud hotlines suffered a median loss of
million in losses and nine cases caused losses of $1 $100,000, whereas organizations without hotlines
billion or more. had a median loss of $200,000. We found similar
reductions in fraud losses for organizations that had
internal audit departments, that regularly performed
• Participants in our study estimate U.S. organizations
lose 5% of their annual revenues to fraud. Applied to surprise audits, and that conducted anti-fraud
the estimated 2006 United States Gross Domestic training for their employees and managers.
Product, this 5% figure would translate to
approximately $652 billion in fraud losses.
In 2004, participants estimated 6% of revenue was
lost to fraud.

ACFE Report to the Nation on Occupational Fraud & Abuse