(Second in a 3-part series)
By Jason S. Thompson, CPA/ABV, ASA, CFE, CFF
Partner, Director of Valuation and Litigation Services
Our Fraud 101 article last month dealt with common occupational fraud schemes that occur in privately held businesses. This knowledge can be helpful in designing internal controls to reduce the opportunity for fraud in your business. It’s also helpful to understand exactly who commits occupational fraud.
The Association of Certified Fraud Examiners (ACFE) 2012 Report to the Nations is their most recent study published on occupational fraud and abuse. This report includes demographic information about fraud perpetrators. Based on this data, occupational fraud is most often committed by perpetrators with the following characteristics:
Gender – Males account for approximately two-thirds of occupational fraud cases.
Age – According to the study, approximately 54 percent of the perpetrators were between the ages of 31 and 45.
Education – Approximately 54 percent of perpetrators have a college degree or above.
Position (level of authority) within the Company – Occupational fraud is committed most frequently by the rank and file employees of a company. While this level of authority constitutes the most frequent level of perpetrator, fraud at the owner/executive level of authority is approximately six times more costly than those of other employees.
Tenure with the Company – The longer an employee works for a company, the more trust they can build with supervisors and co-workers. They also have more experience and a better understanding of the company and its transactions. These factors contribute to employees with tenure of between one and five years being the most frequent perpetrators of occupational fraud.
Department at the Company – Employees in the accounting department generated the highest number of occupational fraud cases, according to the study. It was followed closely in second and third place by operations and sales, respectively.
Prior Criminal Background/Employment History – Approximately 87 percent of cases in which information about prior criminal background was available indicated the perpetrator had not been previously convicted of a fraud-related offense. Of the cases with employment history available, 84 percent showed the perpetrator had no prior termination or punishment for occupational fraud.
Keep in mind that just because an employee falls into one or more of these demographic patterns doesn’t mean they will commit occupational fraud; these are merely the common traits found among occupational fraud perpetrators.
Next month’s article will delve into “Why” a person may commit occupational fraud.
If you are concerned about occupational fraud in your organization, please call Jason Thompson at (317) 608-6694 or email [email protected] to discuss how we could be of assistance in finding or preventing fraud.