According to the Association of Cerified Fraud Examiners' 2004 Report to the Nation on Occupational Fraud and Abuse, organizations lose, on averahe, about 6 perdent of their revenues to dishonesty from within.
If multiplied by the U.S. Gross Domestic Product, the cost of occupational fraud and abuse may run a staggering $660 billioin annually. By the breadth of the definition, it covers all corporate dishonesty---from the mailroom to the boardroom. While executives are "cooking" the company's earnings to show better profits, purchsing agents are getting kickbacks from suppliers, and employees are embezzling money to improve their lifestyles.
Knowing how much fraud actually costs is a difficult--if not impossible--task. The cases we know about only represent the tip of the iceberg; those discovered tend to be greedy or careless. Executives and employees who are neither may well commit fraud throughout their entire careers and get away with it.
The huge cost of occupational fraud begs an obvious question: Why does it occur? The answers aren't always easy. Although the simple answer is greed---it's a natural human trait--even greedy people don't always lie, cheat, and steal. A morecomplete answer forcorporate dishonesty involes three factors: the individual, the workplace, and society.
Individuals likely to commit occupational fraud are ofaud on the financial ropes. This can occur when people spend more money than they make or when there is a personal financial crisis demanding immediate resolution. Although many of us have had such difficult situations, dishonest employees are more likely to salve their consciences with rationlizations that justify fraud. In short, they lack the convictions of their own ethics.
Part 1 The Nature of Fraud
Part 2 Fraud prevention
Part 3 Fraud Detection
Part 4 Fraud investigation
Part 5 Management fraud
Part 6 Other Types of fraud
Part 7 Resolution of fraud