Fraud investigations worldwide reveal that asset misappropriation, corruption and financial statement fraud are the three main types of fraud, according to the Association of Certified Fraud Examiners (ACFE).
The ACFE identified these three key types of fraud in its 2014 Report to the Nations, the results of a global survey conducted biennially to study the costs, schemes, perpetrators and victims of fraud.
“Asset misappropriation is by far the most common type of fraud,” says David Anderson, principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley. “But financial statement fraud, while not nearly as common, is a far more costly type of fraudulent activity.”
According to the ACFE, asset misappropriation — or the theft of cash or other assets such as inventory, supplies or company equipment — occurs in more than 85 percent of reported fraud cases. (Because some fraud investigations find that more than one type of fraud is committed within the same incident, the total of the three types exceeds 100 percent.) The median dollar loss reported from asset misappropriation is $130,000, the ACFE study noted.
Corruption occurs in more than 35 percent of the reported fraud cases, the report found. Fraud by corruption involves misusing one’s influence (such as persuading someone to use a particular vendor or hire a particular person) or violating one’s duty to one’s employer (such as purchasing from a vendor whose price is more expensive or whose product is inferior; or hiring a less qualified employee). ACFE said the median dollar loss from corruption is $200,000.
Financial statement fraud represents only 10 percent of the reported cases of fraud, but the median dollar loss from this type of fraud is $1 million, the ACFE report says. Fraud investigations have shown that financial statement fraud occurs when a person intentionally misstates or omits material information from an organization’s financial statements, according to the ACFE. Financial statement fraud can be perpetrated against a lender (by overstating a company’s sales, profits or assets in order to get a loan); an acquirer (by overstating a company’s sales, profits or assets in order to get a higher acquisition price); or shareholders/the public (by overstating a company’s sales, profits or assets in order to boost a company’s share price).
“Regardless of the type of fraud, it is clear that organizations today are at high risk of loss due to fraud and that every business, government entity and organization must have a strong fraud deterrence program in place to combat it,” said Anderson, a Certified Fraud Examiner and an ACFE member.
A comprehensive fraud deterrence program developed by a firm that provides forensic accounting services in Philadelphia and the Delaware Valley can help protect your organization, Anderson said. At the first hint of suspicious activity, Anderson urges organizations to contact a Certified Fraud Examiner to conduct a thorough fraud investigation and end the fraudulent activity.
During the coming weeks, Anderson will share more findings from ACFE’s 2014 Report to the Nations. The Association of Certified Fraud Examiners is the world largest anti-fraud organization, dedicated to fighting fraud through its more than 70,000 members in more than 150 countries worldwide.
If you require the services of a Certified Fraud Examiner 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 firstname.lastname@example.org.
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, litigation support, economic damage analysis, business consulting and outsourced CFO services. Company principal David Anderson 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.