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 the analysis by forensic accounting expert David Anderson of the Association of Certified Fraud Examiners’ (ACFE) “2020 Report to the Nations – 2020 Global Study on Occupational Fraud and Abuse.” This week, Anderson – from David Anderson & Associates, a Certified Fraud Examiner in Philadelphia – focuses on corruption:
The organization “Transparency International,” a global coalition against corruption (www.transparency.org), defines corruption as: “The abuse of entrusted power for private gain. It can be classified as grand, petty, or political, depending on the amounts of money lost and the sector where it occurs.”
The 2020 ACFE report shows that 43 percent of all frauds involve some form of corruption with the median loss from corruption being $200,000, and the fraud lasting an average of 18 months.
The 2020 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-two percent of corruption cases were perpetrated by someone in a position of authority (owners/executives or managers).
- The Purchasing Department is the department most at risk for corruption. 81 percent of cases involved Purchasing Department fraud.
The industries with the highest proportion of corruption cases are:
- The Energy Sector (66 percent)
- Telecommunications (56 percent)
- Transportation and warehousing (52 percent)
Corruption is the most likely fraud committed by employees of any size companies/organizations (those with fewer than 100 employees and those with 100+ employees).
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 unusually reserved for larger customers). NOTE: 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. NOTE: Bid rigging also can be achieved by working 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.
The next blog article in this series will discuss how companies/organizations react after a fraud has been discovered and what their experiences are in attempting to recover fraud losses.
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 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, 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.