The Anatomy of Fraud
By Smadar Rinat, Prager Metis International LLC
The Association of Certified Fraud Examiners (ACFE) released the “Report to the Nations: 2020 Global Study on Occupational Fraud and Abuse”, covering cases investigated by certified fraud examiners around the globe. Impacted organisations included private, public, government, and not-for-profit entities. Findings of the Report are summarised below.
While asset misappropriation was found to occur more frequently than other frauds, it resulted in the lowest median loss. In contrast, financial statement fraud occurred less frequently but resulted in the greatest loss. Corruption crimes fell in the middle in terms of frequency and financial cost.
Detection was one of the most important keys to fraud prevention.
Frauds were mostly uncovered by tips from employees. Organisations with hotlines detected fraud sooner and suffered lower losses.
The offender’s level of authority tended to correlate with the magnitude and length of the crime, while the financial damage was correlated to the perpetrator’s length of employment with the entity.
While committing fraud, perpetrators often exhibited red flags. The most common were living beyond means; financial diffculties; unusually close association with a vendor/customer; control issues/ unwillingness to share duties.
Lack of internal controls contributed to almost one-third of frauds. The presence of anti-fraud controls resulted in lower losses and faster detection. It is important to note that annual financial statements audits are not designed to detect fraud. An organisation’s management is responsible for the design, implementation, and maintenance of internal controls to prevent and detect fraud.
The coronavirus pandemic has introduced many challenges, including changes in business volume and activities, and shifting of a large percentage of the workforce to remote work. This new environment requires organisations to reevaluate internal controls, policies, procedures, and fraud risks.
2020 “Report to the Nations”, Copyright 2020 by the Association of Certified Fraud Examiners, Inc.
Smadar RinatGGI member firm
Prager Metis International LLC
Advisory, Auditing & Accounting, Corporate Finance, Fiduciary & Estate Planning, Tax
More than 15 offices throughout the USA
T: +1 212 643 0099
Prager Metis International LLC is a top accounting firm providing a full range of accounting, audit, tax, and advisory services to domestic and international clientele in a wide range of industries. With 17 offices worldwide, they have a level of expertise and a unique global presence that makes their clients’ world, worth more.
Smadar Rinat is a Principal in the international and audit and accounting departments of Prager Metis CPAs, a Member of Prager Metis International Group. Smadar has over 25 years of experience in the accounting industry. She specialises in providing audit, review, compilation, and accounting services.
Published: Auditing, Reporting & Compliance Newsletter, No. 04, Autumn 2020 l Photo: helivideo - stock.adobe.com