Here are key findings from the 2018 ACFE Fraud Report. The survey is titled the 2018 Report to the Nations.
Every two years the Association of Certified Fraud Examiners (ACFE) issues a fraud report based on hundreds of actual fraud cases. The report provides great insights into how fraud occurs (the method), the persons stealing (the fraudster), and the damage (the amount of losses).
If you are an auditor (internal or external), then you need to be familiar with the findings in this report. Understanding how theft occurs will enable you to detect and prevent it in the future.
Here are key points from the report.
2018 ACFE Fraud Report Findings
Organizations lose 5% of their revenues to fraud
checkThe median duration of a fraud was 16 months
The median loss per case was $130,000
The median loss per case when owners or executives were involved was $850,000
checkBusinesses with a 100 or fewer employees suffered a median loss per case of $200,000
checkBusinesses with more than 100 employees suffered a median loss per case of $104,000
checkIn 40% of the cases, tips were the initial detection method (53% of the tips came from employees of the organization; 32% of the tips came from vendors, customers, and competitors)
checkFraud losses were 50% smaller for organizations with fraud hotlines
checkOnly 4% of the fraudsters had a prior fraud conviction
checkOccupational fraud was committed in the following categories: (1) asset misappropriation (89%), (2) corruption (38%), and (3) financial statement fraud (10%) — in some cases, the fraudster used multiple schemes
checkThe median losses were (1) $114,ooo for asset misappropriation, (2) $250,000 for corruption, and (3) $800,000 for financial statement fraud
check70% of corruption cases were committed by someone in a position of authority
check82% of corruption cases were committed by males
check50% of corruption cases were detected by a tip
checkInternal control weaknesses led to nearly half of the fraud
checkSmall businesses typically have fewer anti-fraud controls than larger organizations, leaving them more vulnerable
checkData monitoring/analysis and surprise audits were correlated with the largest reductions in fraud losses and duration (yet only 37% of victim organizations implemented these controls)
checkA majority of the victim organizations recovered nothing
checkFraudsters that were with the company for more than five years stole an average of $200,000
checkFraudsters that were with a company for less than five years stole an average of $100,000
checkThe industries with the highest levels of fraud were (1) Banking and Financial, (2) Manufacturing, (3) Governments, and (4) Health Care
checkThe departments with the highest level of fraud were (1) Accounting (14%), (2) Operations (14%), (3) Sales (12%), and (4) Executive/upper management (11%)
check69% of frauds were commented by males with a median loss of $156,000 (the median loss from female thefts was $89,000)
check61% of the fraud cases involved someone with a university degree or postgraduate degree
checkWhen one fraudster was involved, the median loss was $74,000
checkWhen two fraudsters were involved, the median loss was $150,000
checkWhen three or more fraudsters were involved, the median loss was $339,000
checkLiving beyond their means was the primary behavioral red flag (41% of cases)
I have been a member of the Association of Certified Fraud Examiners since 2004. Why? Because I want to be a better auditor. And I have found that the ACFE has given me a much greater understanding of how fraud happens and how to prevent it. The organization has made me a much better auditor. Consider joining this organization. (You can join without becoming a Certified Fraud Examiner (CFE), though I recommend doing that as well. Learn more about becoming a CFE.) You’ll be glad you did.
You'll receive my free 10-day course with examples of frauds and how to prevent them in your organization. You'll also receive my periodic newsletter. (You can unsubscribe at any time.)
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