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OVER 80% OF OCCUPATIONAL FRAUDS INVOLVE ASSET MISAPPROPRIATION. CASH WAS THE TARGETED
[ETHICS]
TWO NEW FRAUD STUDIES PROVIDE MORE EVIDENCE THAT ORGANIZATIONAL
commitment to a code of conduct that stresses open communications and concern for ethical behavior really does pay off. In today's post-Enron focus on effective governance, management accountants and financial managers should emphasize actions promoting ethical behavior that can preserve assets and thus improve profits.
Periodically, the Association of Certified Fraud Examiners surveys its members to ascertain the nature and extent of occupational fraud and abuse in the United States. Their latest survey, 2002 Report to the Nation: Occupational Fraud and Abuse, contains some startling results:
* Certified fraud examiners estimated that 2002 frauds cost some 6% of revenue, which projects to $600 billion in total and averages $4,500 per employee.
* Over 80% of occupational frauds involve asset misappropriation. Cash was the targeted asset 90% of the time, and the average scheme lasted 18 months.
* The most common detection method was a tip from an employee.
* Organizations with hotlines cut their fraud losses per scheme by about 50%.
* Smaller businesses are the most vulnerable to...