Key Fraud Survey Insights from the ACFE’s 2016 Report to the Nation

By Charles Hall | Fraud

Jul 12

If you are to prevent fraud, you must first know how it occurs. Every two years the Association of Certified Fraud Examiners issues its fraud survey titled Report to the Nation. Below you’ll see key fraud survey insights from the 2016 study.

Key Fraud Survey Insights

Key Fraud Survey Insights

  • A typical organization loses 5% of revenues in a given year as a result of fraud
  • The median loss for all cases was $150,000
  • 23% of the cases involved losses of more than $1 million
  • Asset misappropriation occurred in more than 83% of cases
  • Of the asset misappropriation cases, billing schemes and check tampering schemes pose the greatest risk
  • The median duration of the frauds was 18 months
  • Schemes that lasted more than five years caused a median loss of $850,000
  • In 94.5% of the cases, the perpetrator took some efforts to conceal the fraud (usually creating or altering documents)
  • 39% of the cases were detected by tips
  • Whistleblowers are most likely to report fraud to their direct supervisors (20.6% of cases) or company executives (18%)
  • Approximately two-thirds of the cases targeted privately held or publicly owned companies
  • Corruption is more prevalent in larger organizations
  • Check tampering, skimming, payroll, and cash larceny schemes are twice as common in small organizations when compared to larger organizations
  • Fraud is most prevalent in the following industries: Banks, governments, manufacturing 
  • The presence of anti-fraud controls correlates with both lower fraud losses and quicker detection (33% to 50% more quickly)
  • The most prominent weakness is a lack of internal controls (cited in 29.3% of cases)
  • The perpetrator’s level of authority is strongly correlated with the size of the fraud
  • More occupational frauds originate in the accounting department (16.6%) than in any other business unit
  • The more individuals involved in an occupational fraud scheme (collusion), the higher the losses tend to be
  • For schemes with five or more perpetrators, the median loss was $633,000
  • One of the more common red flags was the fraudster was living beyond his or her means
  • Only 5.2% of perpetrators had previously been convicted of a fraud-related offense
  • In 40.7% of cases, the victim organizations decided not to refer their fraud cases to law enforcement

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About the Author

Charles Hall is a practicing CPA and Certified Fraud Examiner. For the last thirty years, he has primarily audited governments, nonprofits, and small businesses.He is the author of The Little Book of Local Government Fraud Prevention and Preparation of Financial Statements & Compilation Engagements. He frequently speaks at continuing education events.Charles is the quality control partner for McNair, McLemore, Middlebrooks & Co. where he provides daily audit and accounting assistance to over 65 CPAs. In addition, he consults with other CPA firms, assisting them with auditing and accounting issues.