Tip Hotlines Enhance Fraud Deterrence

Performing a formal financial audit annually is thought by many to be the most effective means of fraud detection and fraud deterrence.  It’s not.  Only three percent of all fraud is detected by a formal financial audit.  In fact, more than twice as many are discovered by accident than by formal audit.

So what is the best way to detect and prevent fraud?  You might be surprised.  According to the 2014 Report to the Nations from the Association of Certified Fraud Examiners, tips are responsible for uncovering fraud more so than any other method.  More than 42 percent of all frauds were exposed as the result of information provided by tipsters.  And who were the main source of these tips?  By far, it is a company’s own employees, the ACFE report said.  A whopping 49 percent of all frauds reported via tips came from company employees.

“Employees can be your first line of defense against fraud,” said 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.  “Employees may see fraudulent or suspicious activity, but may be reluctant to be identified as the source of a tip, either because they fear retribution from other employees or because they’re not absolutely sure that fraud is occurring.”

So how do you encourage employees to come forward?  The best way is through the use of an anonymous tip hotline.

“Employees are far more willing to report illicit activity if their anonymity is protected,” said Anderson, a Certified Fraud Examiner and an ACFE member.  “The anonymous tip hotline provides them with the vehicle they need to do the right thing and bring the fraud to the attention of people in charge.”

Anderson notes companies do not have to set up the tip hotline themselves.  Third party companies will step into set up and operate the hotline for a reasonable fee and will maintain the employee’s confidentially.  In fact, having an outside party manage the hotline further assures employees that their identity will not be revealed by something they say or by speaking with someone who recognizes their voice.

Companies that provide tip hotlines for their employees typically find that the duration of fraudulent activity is cut in half and losses are reduced by more than 40 percent.

A tip hotline is an important component of a comprehensive fraud deterrence program that can be created by a firm that provides forensic accounting services in Philadelphia and the Delaware Valley, said Anderson, who urges organizations to protect themselves by contacting a Certified Fraud Examiner to conduct a thorough fraud investigation at the first sign of suspicious activity .

In the coming weeks, Anderson will continue to share findings from ACFE’s 2014 Report to the Nations, the results of a global survey conducted biennially to study the costs, schemes, perpetrators and victims of fraud.  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

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.