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Determining The Cost Of Fraud Essay

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Occupational fraud can be defined as “the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets” (ACFE, 2016). Asset misappropriation proved to be the most common form of occupational fraud with 83% of cases but it has the smallest median loss of $125,000 whereas the Financial statement fraud occurs in less than 10% of cases but its median loss of $975,000 (ACFE, 2016). This figure only shows the amount of losses caused by the known fraud cases, as it is impossible to know the undetected and unreported cases (ACFE, 2016). However, it is essential to determine the cost of fraud as it helps to understand the scope and impact of the problem and helps the organizations to quantify the fraud risk and assist in deciding the allocation of antifraud resources and programs. The financial losses are also related to the length of time the fraud remain undetected. The 2016 study by ACFE finds that the median duration of a fraud goes undetected was 18 months and in some extreme cases more than five years (ACFE, 2016). Sources of fraud can be internal or external. The internal fraud can further breakdown into management and employee fraud. Misappropriation of assets is a type of employee fraud whereas Financial statement fraud is categorized as management fraud. Although overlap is also possible. The 2016 study of fraud by ACFE found that the most common combination of frauds was asset
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