U.S. public companies lost a median of 1.06% of their annual revenue to known frauds last year, amounting to billions of dollars, according to a new report.
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When asked to rank 10 factors they believe contribute to fraud at U.S. public companies, employees rated the regulatory environment as the most significant contributing factor. External auditors cited economic conditions as the most significant contributing factor of fraud.
Two-thirds of participants said they believe the overall level of fraud has increased over the past two years, and over 70% rated the current level of fraud as medium or high. Looking ahead to the future, two-thirds of participants predict the overall level of fraud will increase over the next two years.
"This report shows that fraud is not a victimless crime, even at larger corporations where people may think they can bear the brunt of large financial impacts," said ACFE president John Gill in a statement. "The losses these companies face are significant, both financially and in many other ways. Fraud can impact a public company's stock price, reputation, ability to hire and much more. Our goal in sharing these findings is for anti-fraud professionals, company management, financial reporting stakeholders, and the general public to better understand the risk that fraud poses to U.S. public companies."
Cyberfraud ranked as both the most likely and most significant fraud risk. Of the various kinds of fraud, financial statement fraud was seen as the least likely to occur, but the impact these types of frauds do occur is expected to be significant. The risks cited as being the most likely are all external frauds committed by individuals outside the organization: cyberfraud, customer payment fraud, and fraud by vendors and sellers. The risks noted as being the least likely are all internal frauds carried out by individuals inside the organization: financial statement fraud, bribery and corruption, and asset misappropriation/embezzlement.
"Every member of the financial reporting ecosystem plays a critical role in deterring and detecting fraud, and we are excited that this report can arm key stakeholders with insights about fraud risks specific to U.S. public companies. Remaining vigilant, including exercising professional skepticism, and having a questioning mind, are vitally important in the fight against fraud," said Dennis McGowan, vice president of professional practice and anti-fraud initiatives at the Center for Audit Quality, which is part of the Anti-Fraud Collaborative, in a statement.
A copy of the report is
