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Every business owner can benefit from the skills of a forensic accountant.
It is estimated that fraud and abuse is experienced by 20% of U.S. businesses each year. This translates to an estimate of over $600 billion lost to fraud. Do you think your business is safe? Think again. These days, the risk of fraud occurring among American business owners is higher than ever, due the current economic conditions. It estimated that 5% of all business will incur some type of fraud that might only be discovered through forensic accounting.
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The Hard Facts About Occupational Fraud
Some findings from a recent Report to the Nation on Occupational Fraud & Abuse conducted by the Association of Certified Fraud Examiners (ACFA)...
- The repercussions of fraud weigh heavily on employers. Fraud and abuse costs employers an average of $9 a day per employee, with an annual cost to US organizations of over $400 billion. The average organization loses about 6% of its total annual revenue to fraud and abuse committed by its own employees.
- There are different types of fraud that can pose as threats to your business. The most common types of occupational fraud include asset misappropriation, fraudulent statements, bribery and corruption.
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Frequency of fraudulent activities varies depending on industry and size of the organization. The most costly abuses occurred in organizations with less than 100 employees. The education industry experienced the lowest median losses; and the highest median losses occurred in the real estate financing sector.
Example: John works at an auto dealership in Bethesda, Maryland. Early this morning, he was going over his books and noticed that things weren't quite in order. After making calls to his accountant and his bank, he found that several thousand dollars had gone missing. The forensic accountant he hires gets to work, analyzing his account activity, policies and procedures. Voila! The forensic accountant finds a lot of gaps and deficiencies in the dealership's internal controls. The bookkeeper that John hired about six months ago was collecting checks as well as depositing them. She had access to all the books. She had left recently, saying that a family member was sick and that she had to move back home, etc. John shakes his head. He made so many mistakes. He made it so easy for the bookkeeper to take this money, which had gone unnoticed for many months now. The forensic accountant was able to illuminate John as to how he could put controls in place that would prevent such an occurrence in the future.
Why is fraud so rampant? There have been many studies done on why people commit fraud. There has to be a certain mix of ingredients in order for a person to commit fraud. There has to be opportunity, of course, and that's something that most companies have provided. A forensic accountant can assess the policies and procedures of a company to make sure that there is little opportunity to commit acts of fraud. At least make it very, very hard - if not impossible - for fraud to be committed.
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