David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, forensic accounting, and marital dissolution services in Philadelphia and the Delaware Valley.

This blog continues my discussion of the Association of Certified Fraud Examiners (ACFE) “Occupational Fraud 2024 – A Report to the Nations.” This week, I discuss the various controls that companies/organizations put in place to prevent fraud and how effective these controls are:

• The 2024 Report identified 18 specific anti-fraud controls and noted that all 18 were associated with lower fraud losses and quicker detection of the frauds.
• The most common anti-fraud controls employed by companies/organizations were:
  • Putting in place a code of conduct (present in 85 percent of the companies/organizations)
  • Having an external audit of the company’s/organization’s financial statements (present in 84 percent of the companies/organizations)
  • Having an active internal audit department (present in 80 percent of the companies/organizations)
  • Having management certification of the company’s/organization’s financial statements (present in 77 percent of the companies/organizations)
  • Having an external audit of the internal controls over the company’s/organization’s financial reporting (present in 72 percent of the companies/organizations)
  • Regular management review of financial reporting (present in 72 percent of the companies/organizations)
  • Having a confidential tip reporting hotline (present in 71 percent of the companies/organizations)
  • Having an independent audit committee (present in 68 percent of the companies/organizations)
  • Providing fraud training for employees (present in 63 percent of companies/organizations)
• The effectiveness of these most common controls (for the seven most effective controls) were:
  • Having surprise audits reduced the median loss by 63 percent and the duration of the fraud by 50 percent
  • Having regular management review of financial reporting reduced the median loss by 60 percent and the duration of the fraud by 48 percent
  • Having an external audit of the company’s/organization’s financial statements reduced the median loss by 52 percent and the duration of the fraud by 50 percent
  • Having a confidential tip reporting hotline reduced the median loss by 50 percent and the duration of the fraud by 50 percent
  • Providing fraud training for managers and executives reduced the median loss by 50 percent and the duration of the fraud by 37 percent
  • Having an anti-fraud policy in place reduced the median loss by 50 percent and the duration of the fraud by 33 percent
  • Performing proactive data monitoring and analysis reduced the median loss by 50 percent and the duration of the fraud by 50 percent.
• It is interesting to note that of the seven most effective anti-fraud controls, only three (regular management review of financials, having an external audit of the financial statements, and having a hotline) were among the most frequently used controls. This points to somewhat of a disconnect from what company executives believe are the most effective controls and those that actually are.
• Over the past 8 years, two anti-fraud controls have seen significant increases in use:
  • Providing fraud training for employees – an increase of 11 percent
  • Providing fraud training for managers/executives – an increase of 11 percent
• Other anti-fraud controls used less frequently by companies/organizations included:
  • Creating employee support programs (especially for those suffering from addictions/dependencies or experiencing depression)
  • Having an independent audit committee
  • Providing rewards for whistleblowers
  • Job rotation and mandatory vacations

My next blog article will discuss corruption and its impact on companies/organizations.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley. The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services. Company principal David Anderson is a forensic accounting expert in Philadelphia who has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Valuation Analyst, and a Certified Fraud Examiner in Philadelphia.

If you require the services of a Certified Valuation Analyst in Philadelphia or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.