Page 424 - ACFE Fraud Reports 2009_2020

Median Loss and Median Duration by Detection Method
Figure 12 illustrates the relationship between the detection method, median loss and median duration of occu-
pational frauds. The larger circles represent a higher median loss, and the detection methods are organized left-
to-right in order of median duration. Frauds that were discovered by accident tended to last the longest, with a
median duration of 32 months, and had a median loss of $325,000. Schemes that were first detected by notifica-
tion from law enforcement caused the highest median loss at $1,250,000 and had a median duration of 30 months.
The data highlights how the results of fraud cases tend to differ based on the initial detection method. One of
the most visible distinctions is that the five detection methods with both the shortest duration and lowest loss —
surveillance/monitoring, account reconciliation, IT controls, internal audit and management review — involved
proactive efforts to discover fraud. In contrast, detection methods that are not the result of efforts within the orga-
nization to detect fraud — confession, notification by law enforcement, external audit and by accident — tended
to last longer and cost more. In other words, having adequate controls that seek out fraud, rather than relying on
external or passive detection methods, can dramatically reduce the cost and duration of such schemes.

Other factors that might be affecting this data include the possibility that some schemes that are commonly de-
tected through a particular method tend to involve lower amounts of assets. Additionally, some schemes generally
will not be detected by certain methods (e.g., IT controls).

Figure 12: Median Loss and Median Duration by Detection Method

40

35
$325,000
30 $220,000 $1,250,000 $360,000 32 months
30 months
30 months
MEDIAN MONTHS TO DETECTION 20 $100,000 $125,000 $149,000 $220,000 24 months
25
21 months

15
18 months
18 months
18 months
10
$70,000
$75,000 11 months
$49,000 10 months
5 9 months
0
Surveillance/ Account IT Internal Management Tip Confession Document Notified External By
Monitoring Reconciliation Controls Audit Review Examination by Law Audit Accident
Enforcement
*“Other” category had insufficient responses for median loss calculation. DETECTION METHOD

20 REPORT TO THE NATIONS ON OCCUPATIONAL FRAUD AND ABUSE