Bi-Annual Survey Reports on Occupational Fraud Statistics and the Success of Internal Controls, Among Many Other Findings

The Association of Certified Fraud Examiners (ACFE) publishes a bi-annual survey on corporate fraud. Recently, it released this report, entitled “Occupational Fraud 2022: A Report to the Nations.” The survey covered 2,110 cases of fraud from 133 countries, causing a total loss of more than $3.6 billion.

The following are some of the findings of this survey:

• It is estimated that 5% of revenue is lost to fraud each year. The median loss amounted to $117,000, though the average loss was $1.78 million. 21% of cases had losses of at least $1 million.
• Asset misappropriation schemes were prevalent in 86% of respondents, with a median loss of $100,000. While this is by far the most common category of fraud, the median loss was the lowest.  Corruption was reported in 50% of respondents, with the median loss amounting to $150,000.  Financial statement fraud was the least common, reported by only 9% of respondents, but the median loss of $593,000 dwarfs those of the other categories.
• Tips remain the most common fraud detection method, accounting for 42% of discoveries, nearly three times the next highest method of detection, which is internal audit (16%). 55% of all tips come from employees, up from 50% in the 2020 survey.
• The use of hotlines, especially with employee training, increases the likelihood of discovery by tip. Hotlines also shortened the length of the fraud until detection from 18 months to 12 months, and it reduced the median loss from $200,000 to $100,000.
• Email has become the most common method of reporting by whistleblowers. Emails now account for 40% of tips, up from 33 % in 2020 and 26% in 2018.  Web-based tips have also become more common, now accounting for 33% of tips, while telephone hotlines have fallen to 27% of tips, down from 42% in 2018.
• Overall, frauds are being discovered more quickly and are causing smaller losses than in previous surveys. From 2012 to 2022, the median duration decreased from 18 months to 12 months, and the median loss feel from $140,000 to $117,000.
• The following industries bore the greatest median losses:
  • Real Estate: $435,000
  • Wholesale trade: $400,000
  • Transportation and warehousing: $250,000
  • Construction: $203,000
  • Utilities: $200,000
• The smallest companies (those with less than 100 employees) suffered the largest median loss, $150,000.
• 85% of fraud perpetrators exhibited at least one behavioral red flag. The most commonly-observed red flags were living beyond means (39% of cases), financial difficulties (25%), and an unusually close relationship with a vendor or customer (20%).

These findings were just a few of the many survey results discussed in the Report to the Nations, the complete text of which can be found here.

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