2020 Global Study on Occupational Fraud and Abuse – Mark Gardiner, Partner, CPA, CFE

The Association of Certified Fraud Examiners released their 2020 edition of the Report to the Nations fraud study this month. This study contains over 2,500 cases of occupational fraud that were investigated between January 2018 and January 2019. Although this represents a small fraction of the actual number of frauds committed each year, this study is a great tool for Certified Fraud Examiners and management of organizations. Among other important facts, it contains a fraud prevention checklist, a listing of the different types of frauds committed organized by business type, and the position of the employee who committed the frauds.

How fraud is initially detected?
By a tip............................................................................43%
Internal audit.................................................................15%
Management review.......................................................12%
Other/various methods....................................................6%
By accident.......................................................................5%
Account reconciliation.....................................................4%
External audit...................................................................4%
Document examination...................................................3%
Surveillance/monitoring..................................................3%
Notified by law enforcement...........................................2%
IT Controls.......................................................................2%
Confession.......................................................................1%

In cases where a tip was made, the whistleblower reported their suspicions directly to supervisors and internal investigators. Identifying who the whistleblowers report to helps the companies answer several questions, such as who should be trained to handle complaints when one is received and how likely are whistleblowers to report suspicions outside of the organization. It should also be noted that 7% of fraud complaints were made directly to law enforcement or regulators instead of internally, which is something most companies would hope to avoid. It is important to provide training for all staff on how to respond and report fraud allegations.

At Gardiner + Company, we have three Certified Fraud Examiners on our staff. Please feel free to contact any of our staff if you have any questions on suspicions of fraud and/or controls to better protect against fraudulent behavior.

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