Being Proactive Really Is Effective

The Association of Certified Fraud Examiners recently released the 2014 Report to the Nations on Occupational Fraud and Abuse, a biennial publication exploring the costs and trends related to fraud. While the report is full of helpful insights, information and data (approximately 90 charts and graphs are in the 80-page publication), I want to focus on the anti-fraud controls referenced.

One of the most common questions I hear from organizations is, “What can I do to prevent fraud in my organization?” Unfortunately, completely preventing fraud is nearly impossible. However, it is possible to mitigate and manage fraud risks with internal controls (trust isn’t one of them).

Based on the information in the report, proactive data monitoring/analysis is the most effective anti-fraud control. When reviewing cases in which this control is present compared to those where it isn’t, the report shows a 59.7 percent reduction in median loss and a 50 percent reduction in median duration. It may be the most effective, but it’s far from the most common. In fact, it’s present in approximately one-third of the cases submitted for the report. If you are interested in learning more about proactive data monitoring/analysis (aka data mining), read these related posts on the topic.

A surprise audit is another effective anti-fraud control with a 43.3 percent reduction in median loss and a 50 percent reduction in median duration. Again, this control is only present in approximately one-third of the cases studied.

Hotlines also are near the top of the list. Hotlines reduced median loss by 40.5 percent and median duration by 50.0 percent. Hotlines also are responsible for tip reporting—the most common method of detection, according to the report. BKD’s IntegraReport hotline service is a great resource for implementing this control.

Many will focus on the fraud schemes, costs and perpetrators highlighted in the report. I encourage you to take some time to study the anti-fraud controls and see what you can do to help better manage fraud risks in your organization.


Jeremy specializes in providing fraud investigation and forensic data mining services. He assists with fraud investigations through a variety of tasks, including interviewing employees, obtaining evidence, examining documents, analyzing large data sets, estimating losses and presenting findings. Jeremy has experience in using both ACL and IDEA data analysis software for forensic data mining and continuous auditing.

Jeremy Clopton – who has written posts on BKD Forensics.

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