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Focus on Fraud & Forensics: RubinBrown Joins Movement to Shine a Spotlight on Fraud

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Fraud costs organizations worldwide an estimated 5% of their annual revenues, according to a study conducted by the Association of Certified Fraud Examiners (ACFE). If applied to the 2013 estimated Gross World Product, this translates to a potential projected global fraud loss of nearly $3.7 trillion.
November 14, 2014

Fraud costs organizations worldwide an estimated 5% of their annual revenues, according to a study conducted by the Association of Certified Fraud Examiners (ACFE). If applied to the 2013 estimated Gross World Product, this translates to a potential projected global fraud loss of nearly $3.7 trillion.
 
The seriousness of the global fraud problem is why RubinBrown will be participating in International Fraud Awareness Week, Nov. 16-22, 2014, as an official supporter to promote anti-fraud awareness and education. The movement, known commonly as Fraud Week, champions the need to proactively fight fraud and help safeguard businesses and investments from the growing fraud problem.
 
ACFE President and CEO James D. Ratley, CFE, said that the support of organizations around the world helps make Fraud Week an effective tool in raising anti-fraud awareness.
 
“The latest statistics tell us that fraud isn’t going away, and companies that don’t have protective measures in place stand to lose the most,” Ratley said. “That’s why it is reassuring to me to see so many businesses, agencies, universities and other organizations involved in the Fraud Week movement. The first step in combating fraud is raising awareness worldwide that it is a serious problem that requires a proactive approach toward preventing it.”
 
In the 2014 Report to the Nations on Occupational Fraud & Abuse, the ACFE discovered:
  • The median loss caused by the frauds in the study was $145,000. Additionally, 22% of the cases involved losses of at least $1 million.
  • The median duration — the amount of time from when the fraud commenced until it was detected — for the fraud cases reported it was 18 months. 
  • Tips are consistently and by far the most common detection method. Over 40% of all cases were detected by a tip — more than twice the rate of any other detection method. Employees accounted for nearly half of all tips that led to the discovery of fraud.
  • The smallest organizations tend to suffer disproportionately large losses due to occupational fraud. Additionally, the specific fraud risks faced by small businesses differ from those faced by larger organizations, with certain categories of fraud being much more prominent at small entities than at their larger counterparts.
  • The presence of anti-fraud controls is associated with reduced fraud losses and shorter fraud duration. Fraud schemes that occurred at victim organizations that had implemented any of several common anti-fraud controls were significantly less costly and were detected much more quickly than frauds at organizations lacking these controls.
  • The higher the perpetrator’s level of authority, the greater fraud losses tend to be. Owners/executives only accounted for 19% of all cases, but they caused a median loss of $500,000. Employees, conversely, committed 42% of occupational frauds but only caused a median loss of $75,000. Managers ranked in the middle, committing 36% of frauds with a median loss of $130,000. 
  • Collusion helps employees evade independent checks and other anti-fraud controls, enabling them to steal larger amounts. The median loss in a fraud committed by a single person was $80,000, but as the number of perpetrators increased, losses rose dramatically. In cases with two perpetrators the median loss was $200,000, for three perpetrators it was $355,000 and when four or more perpetrators were involved the median loss exceeded $500,000. 
  • Approximately 77% of the frauds in the study were committed by individuals working in one of seven departments: accounting, operations, sales, executive/upper management, customer service, purchasing and finance. 

The 2014 Report to the Nations on Occupational Fraud & Abuse is available for download online here.  
 
RubinBrown encourages your organization to participate in "Fraud Week."  Share this e-focus, check out the resources available at www.FraudWeek.com, and encourage discussions about fraud within your organization.

For more information, please contact: