Summary of Latest Report on Occupational Fraud & Abuse

The Association of Certified Fraud Examiners (ACFE) has issued the 2008 Report to the Nation on Occupational Fraud and Abuse.

The term "occupational fraud" is defined as "The use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization's resource or assets."

Occupation fraud and abuse is a problem faced by organizations or businesses of all types, sizes, industries and locations. The 2008 report is the fifth edition of the ACFE's report to the nation, which is an attempt to educate the public about the serious threat occupational fraud poses.

The study underlying the report was compiled by the ACFE from 959 cases of occupational fraud investigated between January 2006 and February 2008. The information presented below represent some of the findings of this study:

• U.S. organizations lose approximately 7% of their revenues annually to fraud.
• The median loss caused by occupation fraud was $175,000 with over one-quarter of the survey participants losing at least $1 million.
• The typical fraud scheme lasted 2 years from the time it began to the time the scheme was discovered.
• Financial statement fraud had the highest median loss of all types of occupational fraud. Its median loss was $2 million.
• The most common fraud scheme was corruption, which occurred in 27% of all cases studied.
• Occupational frauds are most likely to be detected by a tip than by internal controls or any other means.
• The implementation of fraud controls appears to have a measurable impact on an organization's exposure to fraud. For example, organizations who conducted surprise audits had median losses of $70,000, while those that did not had median losses of $207,000.
• Small businesses are especially vulnerable to fraud and lack of adequate internal controls was the most commonly cited factor that allowed fraud to occur.
• Occupational fraudsters are generally first-time offenders. The most commonly cited behavioral red flags were perpetrators living beyond their means or experiencing financial difficulties at the time of the frauds.
• Frauds committed by upper management (18% of cases) were particularly costly with a median loss of $853,000.
• The industries most commonly victimized by fraud in the study were banking and financial services, government and healthcare.

For more information, please contact:

Tonya Cherry, CPA, ABV, CFE, MAcc

(615) 324-8263 Direct Dial

(615) 815-3363 Direct Fax

tcherry@rmwolff.com