Many of us are familiar with the cartoon depiction of a character battling its conscience. The character is shown with an angel on one shoulder and a demon on the other, in the midst of a decision with opposing outcomes. Both the angel and demon are vying to persuade the character to choose between right and wrong. This illustration simply and easily demonstrates the battle of good versus evil that we have all faced at one time or another. As business professionals, community leaders and government officials, we are called to a high level of leadership to protect our businesses, organizations, and communities from the threat and consequences of occupational fraud.
It is with this goal in mind that the Association of Certified Fraud Examiners (“ACFE”) set out to issue the latest edition of its biannual “Report to the Nations: On Occupational Fraud and Abuse,” which is available free on its website (www.acfe.org). In its comprehensive report, the ACFE seeks to educate its readers on the common characteristics of fraud and frequent steps taken to reduce its occurrence, among other things. The report covers topics such as “The Cost of Occupational Fraud,” “How Occupational Fraud is Committed,” “Detection of Fraud Schemes,” “Victim Organizations” and “Perpetrators.”
Takeaways from the ACFE's Report to the Nations: On Occupational Fraud and Abuse
Occupational fraud is most often committed by first-time offenders.The ACFE cites that in its study only 5% of perpetrators were previously convicted of a fraud-related offense.
Top 3 Behavioral Red Flags Displayed by Perpetrators:
Living beyond means (46%)
Financial difficulties (30%)
Unusually close association with vendor/customer (20%)
Top 3 control weaknesses contributing to fraud:
Lack of internal controls (29%)
Override of existing internal control (20%)
Lack of management review (19%)
The threat of occupational fraud is a reality we must all come to accept. We must be vigilant in our efforts to prevent, detect and deter fraud, while not becoming so consumed by it that causes us to be steered off mission. We must strike the appropriate balance of control procedures; proactively working to minimize situations where we or our employees’ could find the angel and demon competing on their shoulders.
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.