Report to the Nation on Occupational Fraud and Abuse by the Association of Certified Fraud Examiners provides a wealth of valuable information for any company. According to the report, fraud risks vary by company size and type.
Report findings
- Organizations with fewer than 100 employees have a higher rate of fraud exposure to billing, check tampering, skimming, expense reimbursement, cash on hand, payroll, and larceny than their counterparts do. Conversely, employers with more than 100 employees have a greater exposure to corruption and non-cash theft. The most common anti-fraud controls include audits, codes of conduct, management review, hotlines, and training.
- Companies with 100 or more employees are almost twice as likely as smaller organizations to employ anti-fraud controls.
- It generally takes some time to detect fraud. Financial statement fraud had a median duration of 27 months. Check-tampering, expense reimbursement, billing, and payroll schemes 24 months; corruption, cash on hand, skimming, and larceny 18 months.
For context on workplace safety and employer responsibilities that relate to preventing fraud and abuse, see Workplace Safety and Employer Responsibilities.
The list of fraud examples is instructive:
Examples of occupational fraud
- Skimming a small percentage of cash payments or assets.
- Accepting payment from a customer, failing to record the sale and instead pocketing the money.
- Stealing cash and checks from daily receipts before they can be deposited into the bank.
- Creating a shell company and billing employer for services not actually rendered.
- Purchasing personal items and submitting invoices to employer for payment.
- Filing fraudulent expense reports for personal travel, nonexistent meals, etc.
- Stealing blank company checks, and making them out to themselves or an accomplice.
- Stealing outgoing checks to a vendor and depositing them into their own account.
- Claiming overtime for hours not worked.
- Adding ghost employees to the payroll.
- Fraudulently voiding a cash register sale and stealing the cash.
- Stealing inventory from a warehouse or storeroom.
- Stealing or misusing confidential customer financial information.
Nearly one in five frauds were exposed by tips from fellow workers. Many organizations provide employee-tip hotlines; you may want to consider similar reporting channels for your business.
For information that connects occupational fraud risks to workers compensation and related insurance concerns, see Understanding Workers Compensation and Fraud.
To learn more about regulatory and insurance considerations that overlap with fraud prevention efforts, see Understanding Occupational Safety and Health Administration (OSHA) and Insurance.
Read the Association of Certified Fraud Examiners' report for full details and guidance on detection and prevention strategies.
Frequently Asked Questions
How common is occupational fraud?
Occupational fraud occurs across organizations of all sizes, with smaller companies often more exposed to cash-related schemes and larger organizations more exposed to corruption and non-cash theft.
How are most frauds detected?
Many frauds are detected through tips from employees, along with audits and management review processes.
What controls reduce fraud risk?
Common effective controls include regular audits, clear codes of conduct, management oversight, employee reporting channels, and anti-fraud training.
How long does fraud typically go undetected?
Detection times vary by type; financial statement fraud often lasts longer than cash-related schemes, sometimes years before discovery.