Separating objects from value: A high-tech approach to fraud prevention

Learn how the 3P framework can help fraud examiners detect and prevent financial statement fraud.

As fraud examiners know all too well, financial statement fraud is one of the costliest and most complex forms of fraud. Indeed, as data from the Association of Certified Fraud Examiners’ (ACFE) Occupational Fraud 2024: A Report to the Nations shows, despite being the least common type of fraud (5% of cases), organizations lost a median $766,000 from it compared to asset misappropriation, which occurred in 89% of cases analyzed in the report, and caused a median loss of $120,000.

Fraud examiners also know well the complex nature of financial statement fraud and the intricate schemes that perpetrators conduct. According to The Anti-Fraud Collaboration’s analysis of 531 U.S. Securities and Exchange Commission (SEC) accounting and auditing enforcement releases from 2014 to 2019, the most common forms of financial statement fraud involve value manipulation, including improper revenue recognition (43%), reserves manipulation (24%–28%) and inventory misstatement (11%–12%).