Small Businesses Suffer from Company Fraud
Any business is vulnerable to fraud within its ranks, but small firms are especially susceptible, according to new data from the Association of Certified Fraud Examiners.
The median loss suffered by organizations with fewer than 100 employees was $200,000, a figure higher than the median loss in any other category including the largest organizations. Check tampering and fraudulent billing were the most common small business fraud schemes, found in the Report to the Nation on Occupational Fraud and Abuse (pdf).
The study was based on data compiled from 959 cases of occupational fraud that were investigated between January and February 2008.
The typical fraud in the study lasted two years from the time it began until it was caught by the victim organization. The most common fraud scheme for businesses of all sizes was corruption, which occurred in 27 percent of all cases. Fraudulent billing schemes happened in 24 percent of the cases.
Financial statement fraud was the most costly category with a median loss of $2 million.
Occupational fraudsters are generally first-time offenders, the fraud examiners found. Only 7 percent of fraud perpetrators in the study had prior convictions and 12 percent had been previously terminated by an employer for fraud-related conduct.
The experts also said that fraud perpetrators often display certain behaviors that can indicate possible illegal activity. The most commonly cited red flags were the criminals living beyond their apparent means, which occurred in 39 percent of the cases, or experiencing financial difficulties, which happened 34 percent of the time. In financial statement fraud cases, excessive company pressure to perform well was a particularly strong sign.
Most businesses surveyed said they did not have internal controls for spotting fraud and most information about a possible fraud came from a tipster.
Small Business Readers - Do you have internal controls at your business for combating fraud or is fraud something you've ever considered could happen at your business?
By Sharon McLoone |
August 8, 2008; 4:50 PM ET
Previous: Never Give Up on a Good Thing | Next: Fortune Small Business Showcases Fastest Growing Public Firms
Please email us to report offensive comments.
Posted by: Tony Vignieri | August 13, 2008 12:45 PM
Posted by: Gursharan Singh C.M.I.I.A. | August 13, 2008 10:01 PM
Posted by: abe adekunle julius | August 14, 2008 3:23 AM
The comments to this entry are closed.