Cost of Occupational Fraud and Abuse Staggering
The report contains the analysis of 2,410 cases of occupational fraud that occurred in 114 different countries and were investigated between January and October 2015. The analysis found, among many things, that asset misappropriation was overwhelmingly the most common category of occupational fraud, occurring in more than 83% of the cases reviewed. Corruption and financial statement fraud were the next most common categories (35.4% and 9.6% respectively).
Figure 1: Occupation Frauds by Category – Frequency
While asset misappropriation was the common category, it had the lowest median loss with $125,000. Financial statement fraud, on the other hand, had a median loss of an astonishing $975,000.
Figure 2: Occupation Frauds by Category – Median Loss
Within the asset misappropriation category there are many sub-schemes including expense reimbursements, cheque tapering and payroll schemes. Billing schemes, where a payment is submitted for fictitious goods or services, inflated invoices or invoices for personal purchases was the most common type of asset misappropriation (22.2% of the cases) and the median loss was $100,000. Other sub-schemes with high-median losses include cheque tampering ($158,000) and payroll where payments are issued for overtime hours not worked or ghost employees ($90,000).
Figure 3: Frequency and Median Loss of Asset Misappropriation Sub-schemes
In terms of detection methods that produced results, external audits had one of the highest median losses ($470,000) and on average took 24 months to detect the loss. Compare this to active surveillance/monitoring, which has a median loss of a little more than one-tenth the size of external audits ($48,000) and has a median duration of only six months for detection. The study also found that the longer the fraud scheme goes undetected, the greater the losses. Nearly one-third of losses remained undetected for at least two years, and median losses ranged from $300,000 to $850,000.
According to the report, control weaknesses in organizations often directly contribute to fraud. The top three control weaknesses that contributed to fraud were lack of internal controls (29%), override of existing internal controls (20%), and lack of management review (19%). The presence of anti-fraud controls was correlated with lower losses and quicker fraud detection, with proactive data monitoring providing 54% fewer losses and frauds detected in half the time.
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About Anu Sood:
Anu Sood is the Director of Product and Corporate Marketing at CaseWare Analytics and is responsible for the company’s global marketing strategy. Prior to CaseWare Analytics, Anu worked in various roles in the high-tech industry and her accomplishments range from writing software for telephone switches to launching a new global satellite communication service. Anu has extensive experience in strategic marketing, corporate communications, demand generation, content marketing, product management, product marketing and technology development.
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