Page 140 - ACFE Fraud Reports 2009_2020

Detecting Occupational Fraud

How is fraud first discovered? The following chart shows how occupational

frauds were first detected by the victim organizations. The most common
method of detection was by a tip, which was also true in 2004.

We believe this indicates that anonymous reporting mech-
anisms are a key component of effective anti-fraud pro- More frauds are
grams. Unfortunately, the majority of victim organizations detected by tips
in our study did not have established reporting structures than by any other
at the time they were defrauded (see pg. 35 ). It is impor- method.
tant to remember that establishing hotlines is not the only
way to encourage tips. Several other factors play into an
effective reporting structure.

Organizations should conduct anti-fraud training to edu-
cate their employees on how to recognize and report il-
legal conduct, and to impress upon those employees the
fact that such conduct is counterproductive and will not Regarding the means by which frauds were first discovered,
be tolerated. Furthermore, organizations should generally we found it discouraging to note that accidental discovery
seek to foster open channels of communication among was more commonly reported than internal audit, internal
employees and all levels of management so that question- controls or external audit. This suggests that organizations
able conduct can be brought to light before it develops into still need to do a better job of proactively designing con-
outright illegal activity. trols and audits to identify fraud.

Initial Detection of Occupational Frauds 10

Detection Method Internal Controls 12.0% 19.2% 25.4%
34.2%
Tip
By Accident
20.2%
Internal Audit

External Audit
Notified by Police
0% 3.8% 5% 10% 15% 20% 25% 30% 35%
Percent of Cases

10 The sum of percentages in this chart exceeds 100% because in some cases respondents identified more than one detection method. The same is true for
all charts in this Report showing how occupational frauds were detected.

ACFE Report to the Nation on Occupational Fraud & Abuse