Question

Review the most recent Report to the Nation on Occupational Fraud and Abuse published by the ACFE. Discuss what you found interesting in this report and what impact, if any, you think the legal system and corporate governance have had on reducing fraud?

Answer 1

The ACFE states that organizations around the world lose an estimated 5 percent of their annual revenues to occupational fraud, according to the 2014 Report to the Nations on Occupational Fraud and Abuse. Applied to the estimated 2013 Gross World Product, this figure translates to a potential total fraud loss of more than US$3.5 trillion.

Key findings from the report include:

1. Occupational fraud is extremely costly. Twenty-two percent of occupational frauds caused at least $1 million in losses.
2. Fraud schemes can be very difficult to detect. The typical occupational fraud lasted 16 months before it was discovered.
3. Tips are the most effective way to detect fraud. Forty percent of cases were detected by a tip — far more than by any other method.
4. Anti-fraud controls work. Eighteen anti-fraud controls were analyzed, and every one correlated to lower fraud losses and faster fraud detection.
5. High-level perpetrators do the most damage. The median loss in frauds committed by owners/executives was $850,000. Among non-owners/executives the median loss was $100,000.
6. Criminal fraud referrals are declining. Over the past 10 years, the percentage of occupational frauds referred to law enforcement has declined by 16 percent.

MOST INTERESTING IN THIS REPORT AND THE IMPACT OF LEGAL SYSTEM AND CORPORATE GOVERNANCE IN REDUCING FRAUD

1. This is covering for all types of organisations in different sizes and for all parts of the world.
2. Moreover, this will have findings on the fraud committed against the organisation by its own officers, directors or employees which will enable the common people to know and learn about the actual proceedings of the organisation.
3. The report focuses on five critical aspects of occupational fraud cases:
   1. the methods used to commit fraud
   2. how the schemes were detected
   3. the characteristics of the victim organizations
   4. the characteristics of the perpetrators and
   5. the results of cases after the frauds had been detected.
4. The report is prepared after conducting case studies in 125 countries throughout the world.
5. The report details the various types of occupational fraud which enables us to learn the different methods by which the fraud can be occurred:.

a. Corruption

Conflicts of interest

Bribery

Illegal gartuities

Economic extortion

b. Asset misappropriation

Cash

Inventory and all other assets.

c. Financial statement fraud

Networth / Net income overstatements.

Net worth / net Income under statements.

This report enables to bring anti fraud controls even in small types of organisation. The following brought into the effect enabling the reducing the impact of fraud:-

1. Code of conduct.
2. External audit of financial statements.
3. Internal auditing of accounts.
4. Management certification of financial statements.
5. External audit of internal controls over financial reporting.
6. Management review and reporting of the same.
7. Hotline.
8. Independent audit committee.
9. Employee support programs.
10. Anti fraud policy.
11. Fraud training for employees.
12. Fraud training for managers/ executives.
13. Dedicated fraud department, function or team.
14. Formal fraud risk assessments.
15. Surprise audits.
16. Proactive data monitoring / analysis.
17. Job rotation / mandatory vacation
18. Reward for whistle blowers.