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Fraud in focus: ACFE findings – businesses affected, common causes and key learnings

23 Apr 2018

Fraud in focus: ACFE findings – businesses affected, common causes and key learnings

Fraud in Focus – ACFE fraud study results

A recent global study of fraud discloses significant findings as to the type and scale of fraud impacting on organisations from small business to large corporations across 23 different industries. From the report, we noted 10 key learnings for clients as follows:

Small businesses (defined as <100 employees in the study) lost twice as much to fraud than large business, with a median loss of $200,000 USD
Private companies experience the most fraud at 42% followed by public companies at 29% then government at 16%
Industries suffering the most fraud start with banking and financial services, followed by manufacturing, government, healthcare and retail
The most common of fraud scheme was asset misappropriation, representing 89% of all cases with a median loss of $114,000 USD
The most common cause of fraud not being prevented was weak internal controls, lack of management review and override of internal controls
The most common method of fraud detection was tip-offs, mostly from employees, via a whistleblowing hotlineData analysis and surprise fraud audits resulted in the largest reduction of fraud
Almost all fraudsters (96%) did not have a prior conviction, 85% had no history of employee disciplinary action or termination
The most common fraudster is male, aged 36 to 45 years old, working in accounting or operational roles, with those in executive roles incurring the largest median losses
85% of fraudsters displayed at least 1 behavioural red flag, the most common being living beyond their means (41%), followed by financial difficulties and unusually close association with suppliers/customers

The study is the 10^th of its type conducted by the Association of Certified Fraud Examiners, and reports on the findings of an analysis of 2,690 cases of occupation fraud investigated between January 2016 and October 2017, across 125 Countries.

We provide the following insights as to what the results mean for our clients:

Privately owned businesses are more vulnerable to fraud and need to do more to prevent reputational and financial loss by:
1. Directors and business owners acknowledging that fraud and other serious misconduct is possible in their organisation
2. Increasing the awareness of Directors as to their legal duties to protect the company’s assets and to act in the best interests of the company
3. Assessing the risks of fraud and adequacy of internal controls to prevent, detect and respond to those risks
4. Conducting surprise fraud audits including data analytics over payroll and accounts payable
5. Implementing an independent whistleblowing hotline supported by training to employees as to how to recognise and report fraud red flags
Company directors, executive management, and employees need to increase their awareness as to behavioural indicators of fraud including:
1. Living beyond their means
2. Financial difficulties (including gambling/divorce issues)
3. Control issues, unwillingness to share duties, not taking leave
4. Defensiveness to external enquiry, questioning by management/audit
Company directors must assess culture and conduct risks across their organisation to identify risks of poor corporate culture driving fraud such as:
1. Remuneration and incentive schemes
2. Excessive pressure from within the organisation
3. “Wheeler dealer” attitudes
4. The extent of employee, customer and supplier complaints
5. The extent of employee turnover, absenteeism, performance issues
6. Lack of enforcement of accountabilities

Fraud in focus: ACFE findings – businesses affected, common causes and key learnings

The world’s peak fraud investigation body, the Association of Certified Fraud Examiners – or ACFE – has just released its latest study of fraud cases that have impacted organisations, from small business to large corporations, across 23 different industries.

Fraud in Focus – ACFE fraud study results

The study is the 10th of its type conducted by the Association of Certified Fraud Examiners, and reports on the findings of an analysis of 2,690 cases of occupation fraud investigated between January 2016 and October 2017, across 125 Countries.

We provide the following insights as to what the results mean for our clients:

Grant Thornton’s Forensic Experts are ready to help clients manage and respond to risks of fraud and can be contacted below:

The study is the 10^th of its type conducted by the Association of Certified Fraud Examiners, and reports on the findings of an analysis of 2,690 cases of occupation fraud investigated between January 2016 and October 2017, across 125 Countries.