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Inside Internal Controls

News and discussion on implementing risk management

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fraud risk

How significant is the risk of fraud?

fraud

The best resource for understanding the level of fraud risk is the Association of Fraud Examiners’ (ACFE) annual Report to the Nations, their global study of occupational fraud and abuse. Their 2018 Report is now available and, as always, shares some useful and important insights. The ACFE analyzed 2,690 cases from January 2016 to October 2017 from around the world (48% from the USA, the rest evenly split among other regions).

 

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Common anti-fraud controls ineffective at preventing and detecting fraud

A “typical” business can lose five percent of its revenue to fraud according to a recent global fraud study. And organizations are lucky if they detect the fraud at all. Most businesses find out about fraud from a tip, not from strong internal controls.

 

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Using internal control to prevent fraud

Anti-fraud controls mainly apply to the general area of accounting (purchasing, revenue, payroll, banking and treasury, inventory, assets, etc.), but they will also involve many specific areas of operations, such as sales, payments, expenses, receivables, travel, suppliers, taxes, promotions and much more.

 

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What are you doing about employee fraud?

Some cynical people believe that no organization is free from employee fraud. Even small organizations are hardly immune, despite the trust such employers place in their employees and the controls they have in place. Consider these common misconceptions about employee fraud…

 

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Managing fraud risk

Reducing the risk of fraud from both external and internal sources is something that all businesses have to consider at some time, or continually, depending on the owner’s approach and taste for living on the edge. But seriously, fraud is a serious problem that can damage or even destroy a business, particularly small and medium ones, which can’t afford the potential losses.

 

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