close

Newsroom

Fraud: big impact on small firms

20th June 2014

MGI World Fraud: big impact on small firms

Fraud losses amount to five per cent of companies’ revenues every year as smaller firms are feeling the pinch the most, according to a major new global study from the Association of Certified Fraud Examiners (ACFE). Its biennial Report to the Nations on Occupational Fraud and Abuse shows fraud could be worth a total of $3.7 trillion worldwide.

The smallest organisations suffer “disproportionately” to fraud and are notably lacking in anti-fraud controls, the report found. In addition, the specific fraud risks faced by small businesses differ from those faced by larger companies. Small organisations - those with fewer than 100 employees - incurred a median loss of $154,000, versus the largest companies (more than 10,000 employees) posting a median loss of $160,000.

“While resources available for fraud prevention and detection measures are limited in many small companies, several anti-fraud controls - such as an anti-fraud policy, formal management review procedures and anti-fraud training for staff members - can be enacted with little direct financial outlay and thus provide a cost-effective investment for protecting these organizationsfrom fraud,” says ACFE in its roundup.

But even larger organisations have room for improvement. Many of the most effective anti-fraud controls are being overlooked by a significant portion of organisations, says ACFE. Proactive data monitoring and analysis, surprise audits, a dedicated fraud department and formal fraud risk assessments were among the other methods being under-utilised.

“Fraud schemes that occurred at victim organisations that had implemented any of several common anti-fraud controls were significantly less costly and were detected much more quickly than frauds at organisations lacking these controls,” said the report.

Early detection was key to limiting losses. A fraud detected in the first six months produced a median loss of $50,000. Those lasting five years cost $1 million.

Recovery is a problem, with just 58 per cent of  organisations recovering any of their losses due to fraud, while just 14 per cent had made a full recovery.

Read more on Industry news and Africa, Asia, Australasia, Latin America, Middle East & North Africa, North America, UK & Ireland

MGI World Green and blue abstract pattern with Global VAT Newsletter text over lay

Latest Global VAT Specialist Group Newsletter examines Making Tax Digital (MTD) for the UK

13th April 2021

In the latest newsletter from the Global VAT Specialist Group, Rickard Luckin's Ian Marrow...

MGI World Mine slag heap at sunset with text

Do you have clients with business interests in Africa? MGI Strong Nkv, of Democratic Republic of Congo, produces a detailed NEW Doing Business Guide

14th April 2021

The Democratic Republic of Congo (DRC) is a land of multiple potentials and investment...

MGI World Rabih Kerbaj and team from MGI KICA

Great news from the MENA Region as MGI KICA International signs memorandum of co-operation with HPNI Health Consulting in Lebanon

13th April 2021

MGI KICA International, MGI Worldwide CPAAI member firm in Lebanon, recently signed a memorandum of...