The Fraud Examiner

Numbers Don’t Lie: Critical Lessons from the 2014 Report to the Nations
 

May 2014

By Scott Patterson, CFE

 

When determining the impact of fraud on organizations and the economy, statistics still provide the best measuring stick – and they can communicate facts in a compelling way. Tell a business leader they likely have a fraud problem, and they might politely thank you for the warning … then go on about their business. Show them that their hard-fought, built-from-the-ground-up entrepreneurial dream might be losing 5 percent of its revenues, or more, to fraud, and the reaction is likely to be one of surprise or even shock. Explain that the median fraud loss for a single case is $145,000, and most business leaders, especially those who run small companies, will understand what that means – and the danger such a risk can pose to their economic survival.


Every two years, the ACFE’s Report to the Nations on Occupational Abuse serves as the messenger that brings these and other serious statistics into focus. The median length of a fraud case prior to detection? 18 months. The most likely detection method? Tips, by far (42 percent of cases).  The Report also details findings such as how organizations were affected based upon industry, how the implementation of anti-fraud controls affected exposure to fraud, the breakdown of fraud statistics by geographical region and the most common behavioral traits observed among fraud perpetrators.


Many of the  benchmarks within its 80 pages have remained fairly consistent over the past several editions of the Report – and the 2014 version marks the seventh since the iconic publication was first authored by the ACFE in 1996. So those trends that do emerge bear even more weight in understanding how fraud might impact organizations in the future.

 

Methodology – The Making of the Report

The statistics that take center stage in the Report are drawn from a survey of Certified Fraud Examiners (CFEs) who investigated cases between January 2012 and December 2013. These respondents are asked to provide detailed information on a fraud they investigated, and (for the first time, in the 2014 edition) invited to provide information on a second fraud, as well.  In total, information from 1,483 cases submitted by CFEs in more than 100 nations was compiled to develop the benchmarking statistics on occupational fraud losses, detection methods and perpetrators.


In the hands of fraud examiners, the Report is a tool like no other: it spreads the message in a language that business leaders understand, and must pay attention to. There is a price to be paid for ignoring the risk and cost of fraud, and this price is quantified in the Report.



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