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 2022 – A Report to the Nations.” This week I focus on corruption:
- Transparency International, the global coalition against corruption (transparency.org), defines corruption as:
“The abuse of entrusted power for private gain. It can be classified as grand, petty, and political, depending on the amounts of money lost and the sector where it occurs.”
- The 2022 Report shows that 50 percent of all frauds involve a form of corruption (up from 43 percent in the 2020 Report and from 33 percent in the 2012 Report) with the median loss from corruption being $150,000 (down from $200,000 in 2020), and the fraud lasting an average of 12 months (down from 18 months in 2020).
- The 2022 Report identifies four main types of corruption:
- Conflicts of interest, including purchasing schemes and sales schemes
- Bribery, include invoice kickbacks and bid rigging
- Illegal gratuities
- Economic extortion
- Corruption is the most pervasive form of fraud worldwide.
- Sixty-five percent of corruption cases were perpetrated by someone in an executive or upper management position.
- The Purchasing Department is the department most at risk for corruption; 82 percent of cases involved Purchasing Department fraud.
- The industries with the highest proportion of corruption cases are:
- The Energy Sector (64 percent)
- Manufacturing (59 percent)
- Transportation and Warehousing (59 percent)
- Information Services (58 percent)
- Government and Public Sector (57 percent)
- Corruption is the most commonly committed fraud committed by employees of any size companies/organizations (those with fewer than 100 employees and those with 100-plus employees). Fifty-four percent of organizations with 100-plus employees reported corruption fraud in the 2022 Report.
- Conflict of interest cases principally involve:
- Purchases from favored parties regardless of whether the party provides the best quality and/or lowest prices.
- Sales to favored parties at bargain prices; often these sales are lower than those offered to other parties, or at a price usually reserved for larger customers.
- Favored parties are often friends, relatives, or parties in which the purchaser has a financial interest.
- Bribery cases principally involve:
- Kickbacks to the purchaser for purchasing either more goods or services than would be normally purchased or at higher prices than would normally be paid.
- Bid rigging whereby the purchaser provides inside information to a favored vendor in return for payments/kickbacks.
- Bid rigging can also be achieved by collaborating with the favored vendor to write the request for proposal (RFP) in such a way that only the favored vendor can meet the RFP’s requirements.
My next blog article will discuss how companies/organizations react after a fraud has been discovered and what their experiences are in attempting to recover fraud losses.
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 email@example.com.