The 2012 ACFE Global Fraud Study - Critical Controls You Don't Want to Overlook

Risk Advisory/Internal Audit

By Angela Gillis

The Association of Certified Fraud Examiners (ACFE) published its 2012 Report to the Nations on Occupational Fraud and Abuse. The report is an analysis of 1,388 fraud cases investigated worldwide and sheds light on trends in the characteristics of fraudsters, schemes they perpetrate and types of organizations victimized.

Key statistics offered in the report include the following:

  • The typical organization loses 5% of its revenues to fraud every year
  • Asset misappropriation schemes were the most common and accounted for 87% of the reported cases
  • Financial statement fraud schemes accounted for 8% of cases but caused the greatest median loss at $1 million
  • Corruption and billing schemes pose the greatest risks to companies across the globe
  • Small organizations suffered the largest median losses 

What do these statistics mean to owners, employees, shareholders and other stakeholders of an organization? No organization is immune to fraud risk. The report goes on to note that the smaller the organization, the more vulnerable it is to fraud (fewer and/or less-effective anti-fraud controls). The report recommends that organizations constrained by limited resources embrace cost-effective control mechanisms such as employee education and setting the proper ethical “tone at the top.” Providing employees and other stakeholders (e.g., vendors) access to a fraud hotline in which an individual can anonymously report suspicious activity has proven to be a relatively inexpensive means of deterring fraud. These activities augment, not replace, other critical internal controls to combat fraud including segregation of duties, delegation of authorities and reconciliations, to name a few.

How confident are you that your organization’s fraud mitigation controls are effective? Does the organization’s system of internal control need to be validated with respect to its ability to mitigate fraud? A great starting point is conducting a fraud risk assessment that encompasses the key operations of the organization. The results of a fraud risk assessment provide the baseline for identifying, understanding and remediating control gaps that may have been an invitation to fraud.

The ACFE report concludes that the presence of anti-fraud controls notably correlates with significant decreases in the cost and duration of occupational fraud schemes. Would your organization benefit from a fraud risk assessment

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