Tips Still the Most Common Way Fraud Is Discovered

David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, fraud deterrence programs and forensic accounting services in Philadelphia and the Delaware Valley. 

Many people believe that if their financials are audited or reviewed, then any existing fraud will be discovered.  However, national statistics have consistently showed that only around four to five percent of frauds are discovered because of an audit or review.  In fact, nearly twice as many frauds are discovered purely by accident.

Instead, approximately 40 percent of frauds are discovered via tips.  These tips come in through telephone tip lines, web-based tip applications or via direct e-mails, phone calls or letters written to company officials.  Almost 50 percent of all tips come from company employees.  Another 40 percent of tips come from customers or vendors.

“Employees can be your first line of defense against fraud,” said Anderson, a Certified Fraud Examiner. 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 with an anonymous tip hotline or web-based tip application.

“Employees are far more willing to report illicit activity if their anonymity is protected,” Anderson said. “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.”

Companies do not have to set up the tip hotline or web-based application themselves, Anderson said. Third-party companies will step into set up and operate the hotline or applications for a reasonable fee and will maintain the employee’s confidentially.  In fact, having an outside party manage the hotline further assures employees their identity will not be revealed to anyone other than designated parties by something they say or by speaking with someone who recognizes their voice.

Companies that provide tip hotlines for their employees typically find both the duration of fraudulent activity and amount of the losses are reduced by 50 percent.

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

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.