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The State of Fraud in 2020: First of a Six-Part Series

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.

Every two years, the Association of Certified Fraud Examiners (ACFE) commissions a survey of fraud in the United States and abroad.  The ACFE recently released its 2020 study entitled “Report to the Nations – 2020 Global Study on Occupational Fraud and Abuse.” Over the next several weeks, forensic accounting expert David Anderson of David Anderson & Associates, a Certified Fraud Examiner in Philadelphia, will discuss some of the key findings from the 2020 report.

Up first, some general observations regarding fraud:

  • The ACFE study estimates that the typical business/organization (including non-profit organizations) is losing about 5 percent of revenue each year to fraud.
  • The median loss from fraud is $125,000. This is down 4 percent from the $130,000 median loss identified in the 2018 Report;
  • Twenty-five percent of all frauds result in a loss of over $600,000;
  • The median duration of reported frauds is 14 months, down 12.5 percent from the 2018 Report duration of 16 months;
  • Smaller businesses (those with fewer than 100 employees) lost twice as much to fraud from billing and payroll schemes as larger businesses. Smaller businesses also lost four times as much to fraud from check alteration and payment schemes as larger businesses.
  • Asset misappropriation schemes (frauds involving the theft of cash, inventory, supplies, equipment or other company assets) remained the most common scheme, comprising 86 percent of all fraud schemes (versus 89 percent in the 2018 Report). Median asset misappropriation losses fell from $114,000 in the 2018 Report to $100,000 in the 2020 Report;
  • Financial statement fraud remains the least common scheme at 10 percent but results in the highest losses – $954,000 per fraud in the 2020 Report. The loss amount is up 19 percent from the $800,000 median loss shown in the 2018 Report;
  • Internal control weaknesses, including inadequate separation of duties, were responsible for nearly one-third of all frauds reported in the 2020 Report;
  • The 2020 Report identified 18 different anti-fraud controls that companies had implemented (Anderson will discuss these controls in greater detail in an upcoming blog in this series.) The report found that every control implemented resulted in a reduction in both the duration and amount of fraud.

Anderson’s next blog article will discuss how frauds are detected and the characteristics of the people who commit fraud.

Do you need the services of a Certified Fraud Examiner? If so, you should speak with one from an experienced firm that provides forensic accounting services in Philadelphia and the Delaware Valley. You can do this by contacting the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

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 who has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner, and a Certified Valuation Analyst.