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Association of Certified Fraud Examiners Published ACFE's 2020 Report to the Nations recently.
The report covers 2504 cases from 125 countries. Annual Loss caused by these cases is USD 3.6 Billion. Average loss per case indicated by Report is USD 1,509,000/-. It also indicated that average loss by Fraud to organisations is around 5% of their annual revenue which if extrapolate to the whole world shall be of 4.5 trillion Dollar. Fraud cases are reported in mostly below three categories;
At the highest level, there are three primary categories of occupational fraud. Asset misappropriation, which involves an employee stealing or misusing the employing organization’s resources, occurs in the vast majority of fraud schemes (86% of cases); however, these schemes also tend to cause the lowest median loss at USD 100,000 per case. In contrast, financial statement fraud schemes, in which the perpetrator intentionally causes a material misstatement or omission in the organization’s financial statements, are the least common (10% of schemes) but costliest category of occupational fraud. The third category, corruption—which includes offenses such as bribery, conflicts of interest, and extortion—falls in the middle in terms of both frequency and financial damage. These schemes occur in 43% of cases and cause a median loss of USD 200,000..
71% of victim organisation are private and public limited companies, 16% are government, 9% Not-for-Profit and 4% others. Median loss by each of these organisation types is $164,000, $117,000, $118,000, $75000, $120,000 respectively.
Source: ACFE's 2020 Report to the Nations
Even in the most controlled organisation, some sort of fraud by employees eventually occur sometimes. How early such fraud is detected is most important. There is a direct correlation b/w time gap of fraud detection and financial loss to the organisations. Some frauds stay for a longer period before they get detected. Report says that Payroll, check, financial statements fraud, expenses disbursement and billing frauds lasts for around 24 months while Non-Cash frauds with the least duration of 13 months.
Higher the organisation size is, the more prone to median loss was it. Lack of internal controls and overriding of existing controls were the main controls weakness which caused the frauds.
43% of the cases were detected by tips and 50% of those tips came from employees and 22% from customers. Maintaining a hotline or reporting mechanism speeds up fraud detection and reduces losses. Fraud awareness training further improves cultivation of tips through reporting mechanisms.
64% of organisations who reported frauds had established hotlines and they detected fraud more quickly than those without hotlines. Telephone and email hotlines are still the most popular means but web-based/online forms have gained popularity recently and now stands at the same level on graph as Telephone and Emails.
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