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Q. According to a recent report, the typical U.S. organization loses 5 percent of its annual revenues to fraud. In dollars, that translates to:
a. $120 million annually
b. $360 million annually
c. $652 billion annually
d. $870 billion annually |
The answer is c
By Gary Markey, CPA, CFE, CIA
Manager, Stambaugh Ness Risk Management Team
The "Report to the Nation on Occupational Fraud and Abuse," published by the Association of Certified Fraud Examiners (CFE), covered 1,134 cases of occupational fraud. Those cases revealed that the average organization loses 5 percent of its annual revenue to fraud. Applied to the U.S. Gross Domestic Product for 2006, this translates to about $652 billion in total losses.
The cases in the report had four criteria:
 They involved occupational fraud.
The fraud occurred within the last two years.
The investigation was completed.
The Association of Certified Fraud Examiners was reasonably sure the perpetrators had been identified.
The first "Report to the Nation," published in 1996, was conceived by Joseph T. Wells, a white-collar criminologist for the FBI and founder of the Association of Certified Fraud Examiners.
In a little more than one third of the report's cases, the fraud was detected by a tip (64 percent came from employees, 11 percent from customers, 7 percent from vendors and the rest came from other sources). Because of this fact, the report "strongly supports" establishing a confidential reporting mechanism, such as an anonymous hotline.
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Contact Gary Markey, CPA, CFE, CIA, to perform an internal control study for your company and make recommendations to minimize the potential for illegal activities and employee theft. You can call him at 717-757-6999 or 800-745-8233 or send him a email by using the form below. | |
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