Lessons from the 2024 ACFE Fraud Report

Key Takeaways:
  • In reaction to fraud incidents, 82% of victimized organizations enhanced their anti-fraud controls.
  • Internal controls are not just procedural formalities but are fundamental to the integrity and stability of an organization.
  • With 43% of frauds coming to light through tips, it’s clear that an open organizational culture where employees feel safe to report suspicious activities is instrumental in identifying and mitigating fraud.

 

The 2024 Report to the Nations by the Association of Certified Fraud Examiners (ACFE) unravels the extensive and costly impact of occupational fraud, revealing businesses lose around 5% of annual revenue to workplace fraud. This analysis, based on 1,921 cases from 138 countries, exposes a total loss of more than $3.1 billion, underscoring the persistent threat of fraud across all business sectors. 

The crux of the report highlights asset misappropriation as the most common, yet financially less severe form of fraud, accounting for 89% of the cases with a median loss of $120,000 and should be the primary concern of small business owners. On the other end of the spectrum, financial statement fraud, though occurring less frequently, incurs the most significant financial damage, with a median loss of $766,000. The prevalence of corruption in nearly half the cases further emphasizes the multifaceted risks businesses face. 

How is Occupational Fraud Detected? 

A noteworthy insight from the report is the role of whistleblowing in fraud detection. With 43% of frauds coming to light through tips, it’s clear that an open organizational culture where employees feel safe to report suspicious activities is instrumental in identifying and mitigating fraud. The next two highest detection methods were internal audit and management review for 14% and 13%, respectively of cases identified. 

Why Fraud Prevention is Important 

Delving deeper, the report underlines the importance of robust internal controls as a cornerstone in the fight against occupational fraud. The median duration of fraud schemes, lasting about a year, accentuates the need for consistent and effective internal controls to detect and prevent fraudulent activities proactively. 

Internal controls are not just procedural formalities but are fundamental to the integrity and stability of an organization. They serve as the first line of defense in preventing fraud, ensuring that financial transactions are executed as intended and that assets are safeguarded against unauthorized use. Comprehensive internal controls encompass everything from thorough employee vetting processes to segregation of duties and monitoring systems, all designed to identify and mitigate the risks of occupational fraud. 

The report’s industry-specific breakdown shows that although no industry is immune to fraud, agriculture, manufacturing, wholesale trade and construction ranked among the industries that had the highest median loss per incident, outpacing banking and financial services, insurance, technology and other professional services. 

In reaction to fraud incidents, 82% of victimized organizations enhanced their anti-fraud controls.

This proactive stance showcases a growing acknowledgment among business leaders of the indispensable role that internal controls play in creating a resilient anti-fraud framework. 

Questions? 

By implementing and continually refining internal controls, businesses cannot only detect and prevent fraud more effectively but also protect their reputation, financial health and long-term success. Contact an Adams Brown advisor to discuss how you can strengthen internal controls in your organization.