Page 676 - ACFE Fraud Reports 2009_2020

Median Loss and Duration by Detection Method

Our data also shows that some fraud detection amination or surveillance/monitoring. Our data shows
methods are more effective than others in the sense that schemes discovered through one of these active
that they correlate with lower fraud losses. Figure 11 methods were shorter and had lower median losses
shows the relationship between detection method than those detected passively. The purple bars could
and the associated fraud scheme duration and loss. potentially be passive or active, including tips and
In this chart, the red bars indicate schemes that were external audit.
detected by passive methods, meaning the fraud came What we can learn from this data is that when fraud
to the victim’s attention through no effort of their own, is detected proactively, it tends to be detected more
including notification by police, by accident, or confes- quickly and thus causes lower losses, while passive
sion. Passively detected schemes tended to last longer detection results in lengthier schemes and increased
and were associated with the highest median losses financial harm to the victim. Anti-fraud controls such
relative to all other detection methods. The blue bars as account reconciliation, internal audit departments,
indicate detection methods that are active, meaning involved management review, and active cultivation of
they involved a process or effort designed (at least in tips are all tools that can lead to more effective detec-
part) to proactively detect fraud, such as document ex- tion of occupational fraud.

FIG. 11 How does detection method relate to fraud loss and duration?

MEDIAN L OSS MEDIAN DURATION

$900,000 Notified by police 24 months

$225,000 Confession 17 months

$200,000 By accident 24 months

$150,000 External audit 24 months

$145,000 Tip 14 months

$101,000 Document examination 18 months

$100,000 Management review 17 months

$100,000 Internal audit 12 months

$81,000 Account reconciliation 7 months

$80,000 IT controls 6 months
Passive detection method
Potentially active or passive detection method
Active detection method $44,000 Surveillance/monitoring 7 months

20 Detection Report to the Nations