Page 141 - ACFE Fraud Reports 2009_2020

Sources of Tips Detecting Fraud by Owners and

Tips were the most common means by which occupational Executives
fraud was detected in the cases we reviewed and the ma- Detection of frauds by owners and executives can present
jority of tips — nearly two out of three — were received special problems because these individuals have high levels
from employees. It is important to remember, though, that of authority within their organizations and are typically in
a significant number of tips came from outside sources a position to override controls to avoid detection. Thus, it
such as customers and vendors. As we stated in our 2004 is harder for these schemes to be detected through tradi-
Report, an effective reporting system should be designed tional audits and anti-fraud controls. Our data show that
to reach out not only to employees, but also to these third- nearly half of owner/executive cases were detected through
party sources. a tip, which far exceeded the rate for all cases. Conversely,
only 8.8% of owner/executive cases were detected through
Percent of Tips by Source the operation of internal controls and only 16.2% were de-
tected through internal audits, both of which were lower
than the rates for all cases.
7.1%
This data is important because losses associated with
10.7% Vendor owner/exec schemes tend to be larger than for any other
group, yet these schemes are much less likely to be detect-
Customer ed through normal audits or control functions. This high-
18.1% Anonymous lights the importance of establishing anonymous reporting
64.1% mechanisms, conducting anti-fraud training and fostering
Employee open channels of communication as discussed earlier.

Detection of Frauds by Owner/Executives

48.0% Owner/Exec. Cases
Tip 34.2%
All Cases
17.6%
By Accident 16.2% 25.4%
Detection Method Internal Controls 8.8% 19.2%
Internal Audit
20.2%

21.6%
External Audit
6.8% 12.0%
Notified by Police 3.8%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Percent of Cases

ACFE Report to the Nation on Occupational Fraud & Abuse