Fraud Schemes More Costly to Businesses with Less Than 100 Employees

Small businesses typically have fewer resources to both prevent and recover from fraud, resulting in losses almost twice as much as larger organizations. 

In the 2018 Report to the Nations, the Association of Certified Fraud Examiners (ACFE) reports that organizations with fewer than 100 employees experience the greatest percentage of fraud cases and suffered the largest median loss at a staggering $200,000 per scheme. 

Why are smaller organizations more at risk? 

Larger entities typically have more resources to invest in their anti-fraud programs, as well as a greater ability to separate duties among staff members to help prevent fraud. But, there are steps you can take as a small business owner to protect your organization. Download this 10-Step Fraud Prevention checklist as a starting pointThere are many anti-fraud controls that you can put in place to lower your risk and help you detect a problem more quickly 

Three typical areas of vulnerability 

  • Lack of internal controls – small businesses oftentimes have fewer anti-fraud controls in place but this can be remedied by implementing things such as a code of conduct, having reporting mechanisms in place and educating employees about what to look for. In addition, having an external audit of your internal controls could point out areas of vulnerability. 
  • Types of risks  small businesses also face different types of risk than larger organizations. Fraud in smaller companies often happens in the form of billing, check and payment tampering, expense reimbursements and skimming. This goes back to not having enough staff to implement a proper check and balance system as a layer of protection. 
  • Correlation between authority and fraud loss  there is a strong correlation between the fraud perpetrator’s level of authority and the size of the fraud. While owners/executives only committed 19% of the frauds in the ACFE study, the schemes committed by these individuals resulted in a median loss of $850,000. High-level fraudsters tend to have greater access to an organization’s assets than low-level personnel. They may also have greater technical ability to commit and conceal fraud and they might be able to use their authority to override or conceal their crimes in ways that low-level employees cannot. 

BerganKDV has certified fraud examiners who can help you prevent fraud within your organization. Members of the ACFE, these professionals have successfully completed the CFE exam and have their applications approved by ACFE. CFEs must also complete a minimum of 20 hours of continuing professional education annually. Want to learn more about how these experts can help protect your organization? Start here  

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Fraud Prevention Checklist

The most cost-effective way to limit fraud losses is to prevent fraud from occurring in the first place. Utilize this checklist to help you test the effectiveness of your fraud prevention methods.