Page 94 - ACFE Fraud Reports 2009_2020

Table of Contents

Internal Audits

About 57% of the victim organizations in our study had internal audit or internal fraud
examination departments. These organizations suffered a median loss of $80,000,
compared with the median loss of $130,000 in organizations where there was no
internal audit department.

Median Loss Based on Whether Organization had Internal Audits

$80,000
2004 $130,000
Survey Year Internal Audit

No Internal Audit

2002 $87,500
$153,000

$0 $50,000 $100,000 $150,000 $200,000

Median Loss

The impact on fraud losses associated with internal audits was much greater than the
impact associated with external audits (see below). Additionally, the data presented
earlier on Initial Detection of Occupational Frauds shows that schemes were identified
by internal audits at over twice the rate of external audits, despite the fact that victim
organizations in our study were more likely to have external audits. The discrepancy
between internal and external audits may be largely due to the fact that internal
auditors generally are full-time employees of the victim organization, whereas external
auditors spend a limited amount of time in a number of different organizations. In
addition, external auditors are responsible only for frauds that may have a material
impact on the financial statements as a whole. Nevertheless, the discrepancies
between the two disciplines suggest a need for greater fraud training for external
auditors, particularly given the enhanced fraud detection responsibilities imposed on
them by auditing standard SAS No. 99.

External Audits
The most common anti-fraud measure among the victims in our study was the external
audit. Seventy-five percent of victims employed independent auditors. However, the
effectiveness of external audits in reducing fraud losses was not observable in our
study. In fact, the median loss was actually higher in organizations that had external
audits, as opposed to those that did not. Of course, there are several factors that
contribute to the presence and size of fraud. But it was disappointing to find no trend
28