Small businesses are especially likely to fall victim to occupational fraud, according to a new report released by the Association of Certified Fraud Examiners.
The
Occupational fraud schemes tend to be very costly. The report estimates that U.S. organizations lose 7 percent of their annual revenues to fraud, or approximately $994 billion. The median loss caused by occupational fraud in organizations of all sizes was $175,000. More than a quarter of the frauds involved losses of at least $1 million.
Occupational frauds were most often committed by the accounting department or upper management. Occupational fraudsters are generally first-time offenders. The most commonly cited behavioral red flags were perpetrators living beyond their apparent means or experiencing financial difficulties at the time of the fraud.
However, implementation of anti-fraud controls appears to have a measurable impact on an organization's exposure to fraud. Organizations that conducted surprise audits suffered a median loss of $70,000, while those that did not had a median loss of $207,000. Nevertheless, tips from employees, vendors, customers or other sources seem to be more effective than audits and controls at uncovering fraud.