Key Takeaways From the Latest ACFE Occupational Fraud Report

Occupational fraud is a crime that costs companies billions of dollars annually throughout the world. Perpetrators are finding new and more ways of committing it as technology has improved along with extenuating circumstances such as the COVID-19 pandemic. The Association of Certified Fraud Examiners (ACFE) recently published its 12th edition of Occupational Fraud 2022: A Report to the Nations, which is a culmination of results from more than 2,000 real occupational fraud cases to provide valuable insights into the costs, methods, victims, perpetrators and outcomes of fraud schemes.

Key findings from the current year report continue to show that the most common type of occupational fraud is asset misappropriation, with a median loss of $100,000. Organizations with the fewest employees had the highest median losses with nearly half of all occupational frauds being committed by employees in the operations, accounting, executive/upper management and sales departments. Typically, the longer the tenure of an employee, the higher the loss. Almost half of the fraudulent activity happens with employees who have one to five years of experience at an organization.

The report also found that eighty-five percent of perpetrators showed behavioral red flags, while only six percent had a prior conviction. A staggering number of perpetrators, eighty-three percent, were never punished or terminated when caught committing fraud and over half of the victims of fraud are not able to recover fraud-related losses. While there have been improvements to prevent and detect fraud in organizations, there still seems like there is a long way to go to make sure it is prevented altogether. These cases are not small, and the amount of money that is being lost is still too much.

The report noted that the primary internal control weaknesses, which contributed to occupational fraud committed, were lack of controls (29%), the override of existing controls (20%), lack of management review (16%), poor “tone at the top” (10%), lack of competent personnel in oversight roles (8%), with other weaknesses making up the remainder (17%). It’s important to have established anti-fraud controls, and the 2022 report emphasizes that the most common mistake companies make is implementing these controls after fraud has taken place instead of using them to prevent fraud in the first place. Eighty-one percent of victim organizations stated that post-fraud they modified their anti-fraud controls through increased management review and increased use of proactive data monitoring/analytics.

There were many additional findings in the report that are incredibly insightful. To view the full A Report to the Nations, click here.

After reviewing some of the highlights from the report, the most important thing to note is how crucial it is to have controls in place at your organization to prevent attacks. By implementing robust procedures and routinely training your employees on what red flags of fraud to watch for, you can help keep your organization’s money out of the hands of fraudsters.

Contributing author: Kaitlyn H. Axenfeld, CPA/CFF, CFE, has extensive experience providing audit, review, compilation and advisory services to a wide variety of clients with a focus on the construction and manufacturing industries. Kaitlyn specializes in forensic accounting and consulting services including litigation support to law firms and privately held companies in fraud detection, damage calculations and prevention matters. If you have any questions or need any assistance, please contact Kaitlyn at kaxenfeld@dmcpas.com.