Study finds large disconnect between perception and reality of fraud in most organizations
VANCOUVER, British Columbia, March 7, 2017 /PRNewswire/ -- Business leaders are running their organizations in an 'alternate reality,' with a shockingly inaccurate perception of their fraud environment, according to the 2017 Fraud Survey from ACL. More than 80 percent of respondents said their organization has "medium to no" exposure to fraud, despite industry research showing that fraud occurs in nearly every organization, with more than 2,300 studied losing over $6.3 billion.1
ACL, a risk management software provider helping governments and companies around the world stamp out fraud and corruption, polled more than 500 audit, compliance and risk management professionals on their attitudes toward and knowledge of fraud risk and anti-fraud practices.
"As the phenomena of 'fake news' and 'alternative facts' permeate the U.S. landscape, it is interesting to see how disconnected many executives are from the true prevalence of fraud and corruption in their organizations," commented Dan Zitting, chief product officer at ACL. "It is not uncommon for our team to run simple data analytics for a client and find numerous instances of potential fraud to be investigated."
Nearly two-thirds of respondents (63 percent) reported that a majority of fraud committed in their organizations is not detected, and more than 75 percent said that at least some of the fraud that is detected goes unreported.
"If senior management thinks fraud, waste or abuse is non-existent in their company, they are probably kidding themselves," noted Steve Hummer, director of internal audit for Farm Bureau Insurance of Michigan. "By conducting a thorough, retroactive audit using modern data analytics tools, we uncovered more than a million dollars in losses from claims that had been incorrectly processed—or not processed at all. At some companies, they could even be fraudulently processed."
Respondents also echoed recent findings that fraud professionals can feel pressure to suppress or alter fraud findings from senior leadership, direct managers and even peers. The existence of this internal pressure is not a surprise to most, as it has been revealed quite often in recent studies. However, the survey confirmed that this pressure comes from all sides, including coworkers and audit committees, making it that much harder to overcome.
"As long as companies refuse to admit that fraud exists, the fraud will continue," added Zitting. "As unscrupulous employees and vendors realize the company's ignorance, the problem has great potential to grow."
Help generate greater awareness of fraud by sharing your fraud-related experiences in a safe and anonymous way in ACL's Fraud Confessional.
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1 "Report to the Nations on Occupational Fraud and Abuse." Association of Certified Fraud Examiners (ACFE). 2016. http://www.acfe.com/rttn2016/docs/2016-report-to-the-nations.pdf.
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