The Association of Certified Fraud Examiners (ACFE) has released its 2012 Global Fraud Study, revealing that workplace fraud takes an average of 18 months to discover and causes a 5 percent revenue loss on average for businesses that fall victim. With  International Fraud Awareness Week (Nov. 11 to 17, 2012), upon us here are three things you should know, and resources for helping prevent it within your business:

1. How it happens. According to the report, the ACFE’s research consistently  shows  fraud falling into three categories:

  • The most common, comprising nearly 90 percent of reported fraud cases – asset misappropriation schemes, in which an employee steals or misuses the organization’s resources (e.g., theft of company cash, false billing schemes or inflated expense reports).
  • Corruption schemes, in which an employee misuses his or her influence in a business transaction in a way that violates his or her duty to the employer in order to gain a direct or indirect benefit (e.g., schemes involving bribery or conflicts of interest).
  • The most costly, resulting in a median loss of $1 million – financial statement fraud schemes, in which an employee intentionally causes a misstatement or omission of material information in the organization’s financial reports (e.g., recording fictitious revenues, understating reported expenses or artificially inflating reported assets).

2. Where it happens. The majority of fraud happens in privately-held businesses, with a median loss of $200,000. Among the most commonly victimized industries are manufacturing, banking and financial services, and government and public administration. Regardless of your industry, you should also be aware of the six departments where nearly 80 percent of fraud occurs: accounting, operations, sales, executive/upper management, customer service and purchasing.

3. The red flags.  Occupational fraud is mostly committed by first-time offenders with stellar employment history. However, fraudsters typically display one of five red flag behavioral changes before actually committing the act, including:

  • Living well beyond their means
  • Financial distress
  • Close or unique relationships with vendors
  • Control issues above the norm

Resources for Fraud Prevention

To help you get started on the path to fraud prevention, we’ve compiled the following tools:

  • Download our e-paper, a checklist of the most common internal controls you should be implementing in your business.
  • Take the ACFE Fraud Prevention Checkup to see how your efforts to minimize fraud measure up.

Doeren Mayhew’s Troy, Houston and Ft. Lauderdale CPAs and certified fraud examiners stand ready to help you put an effective internal controls program in place to protect your business. For more information, contact us.

Sources: Association of Certified Fraud Examiners “2012 Global Fraud Study Report to the Nations”