ACFE Releases 2004 Fraud Statistics: Reinforces Need for Sarbanes-Oxley Requirements; Preventative Measures.
Based on 2004 report findings, the typical organization loses 6% of its annual revenues to occupational fraud. If multiplied by the US Gross Domestic Product, which in 2003 totaled just under $11 trillion, it would translate into $660 billion in annual fraud losses.
The report strongly supports Sarbanes-Oxley's requirements for audit committees to establish confidential reporting mechanisms. Occupational frauds were much more likely to be detected by a tip than through other means such as internal audits, external audits and internal controls. Among frauds committed by owners and executives, which tend to be the most costly, over half of all cases were identified by a tip. The report also indicates that confidential reporting mechanisms can significantly reduce fraud losses.
Additionally, while Sarbanes-Oxley only requires publicly traded companies to establish confidential reporting mechanisms for employees, the report suggests that these programs should also embrace third-party sources such as customers and vendors. Among cases that were detected by a tip, 60% of the tips came from employees, 20% came from customers, 16% came from vendors and 13% came from anonymous sources. Companies that have implemented basic employee hotlines to ensure Sarbanes-Oxley compliance could detect significantly more frauds by making their hotlines available to third parties as well.
The 2004 Report to the Nation also reinforces the belief that the most cost-effective way to deal with fraud is to prevent it. According to its findings, once an organization has been defrauded it is unlikely to recover its losses. The median recovery among victim organizations was only 20% of the original loss. Almost 40% of victims recovered nothing at all.
The ACFE's 2004 Report to the Nation aims to better educate the public and anti-fraud professionals about the threat of fraud. The report summarizes the opinions of experts on the percentage and amount of organizational revenue lost to all forms of occupational fraud and abuse, examines the characteristics of the employees who commit occupational fraud and abuse, determines what kinds of organizations are victims of occupational fraud and abuse, categorizes the ways in which serious fraud and abuse occurs; and offers lessons and insight to any organization concerned with limiting its exposure to occupational fraud and abuse. The 2004 Report to the Nation is available to download at www.CFEnet.com/report
About the ACFE
The ACFE, the world's premier provider of anti-fraud training and education, has over 30,000 members, sponsors more than 103 chapters worldwide and provides anti-fraud educational materials to over 100 universities. Certified Fraud Examiners (CFEs) on six continents have investigated more than 1 million suspected cases of civil and criminal fraud. Identified as "the premier financial sleuthing organization" by The Wall Street Journal, the ACFE has captured national and international media attention. For more information about the ACFE visit www.CFEnet.com.
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