Page 495 - ACFE Fraud Reports 2009_2020

How Occupational Fraud Is Committed

Figure 3: Occupational Fraud and Abuse Classification System (Fraud Tree)

Asset Financial
Corruption
Misappropriation Statement Fraud

Net Worth/ Net Worth/
Conflicts of Economic Net Income Net Income
Interest Bribery Illegal Gratuities Extortion Overstatements Understatements
Purchasing Invoice Timing Timing
Schemes Kickbacks Differences Differences
Sales Fictitious Understated
Schemes Bid Rigging Revenues Revenues
Concealed Overstated
Liabilities and Liabilities and
Expenses Expenses
Improper Improper
Asset Asset
Valuations Valuations
Improper Improper
Disclosures Disclosures

Cash Inventory and All
Other Assets

Theft of Cash Theft of Cash Fraudulent Misuse Larceny
on Hand Receipts Disbursements
Asset
Requisitions
Expense
Skimming Cash Larceny Billing Payroll Reimbursement Check Register and Transfers
Schemes Schemes Schemes Tampering Disbursements
False Sales
and Shipping
Shell Ghost Mischaracterized Forged Maker False Voids
Refunds
Sales Receivables and Other Company Employee Expenses Purchasing
Non- Falsified Overstated Forged and Receiving
Unrecorded Write-Off Accomplice Wages Expenses Endorsement False Refunds Unconcealed
Vendor
Schemes
Larceny
Personal Commission Fictitious Altered Payee
Lapping
Understated Schemes Purchases Schemes Expenses
Multiple Authorized
Unconcealed Reimbursements Maker

and adding another category for Theft of Cash on Hand. This appear under Financial Statement Fraud to clarify that these
change was intended to better classify the different operational schemes affect the overall reported financial position and re-
points at which cash can be misappropriated from the victim sults (i.e., the net worth and net income) of the organization,
organization (i.e., at receipt, when kept on hand, or during a rather than just the reported assets or revenue.
disbursement transaction).
Even with these minor changes, however, the general structure of
• Also in 2012, we renamed and refocused the category that cur- the Fraud Tree still holds, twenty years after its creation. This con-
rently appears as Financial Statement Fraud to better reflect sistency reflects the notion that, while fraudsters embrace technol-
the fact that all the schemes in this category involve some form ogy and devise new variations on schemes, the mechanisms and
of falsified or manipulated financial statements. approaches employed by occupational fraud perpetrators fall into
• This year, we modified the second-level category names that clear, time-tested categories.

REPORT TO THE NATIONS ON OCCUPATIONAL FRAUD AND ABUSE 11