Page 151 - Accounting Information Systems

122 PART I Overview of Accounting Information Systems

$210,000. Perpetrators with advanced degrees were responsible for frauds with a median loss of
$550,000.
Conclusions to Be Drawn
Although the ACFE fraud study results are interesting, they appear to provide little in the way of anti-
fraud decision-making criteria. Upon closer examination, however, a common thread appears. Notwith-
standing the importance of personal ethics and situational pressures in inducing one to commit fraud,
opportunity is the factor that actually facilitates the act. Opportunity was defined previously as access to
assets and/or the information that controls assets. No matter how intensely driven by situational pressure
one may become, even the most unethical individual cannot perpetrate a fraud if no opportunity to do so
exists. Indeed, the opportunity factor explains much of the financial loss differential in each of the demo-
graphic categories presented in the ACFE study:
Position. Individuals in the highest positions within an organization are beyond the internal control
structure and have the greatest access to company funds and assets.
Gender. Women are not fundamentally more honest than men, but men occupy high corporate posi-
tions in greater numbers than women. This affords men greater access to assets.
Age. Older employees tend to occupy higher-ranking positions and therefore generally have greater
access to company assets.
Education. Generally, those with more education occupy higher positions in their organizations and
therefore have greater access to company funds and other assets.
Collusion. One reason for segregating occupational duties is to deny potential perpetrators the
opportunity they need to commit fraud. When individuals in critical positions collude, they create
opportunities to control or gain access to assets that otherwise would not exist.
FRAUD SCHEMES
Fraud schemes can be classified in a number of different ways. For purposes of discussion, this section
presents the ACFE classification format. Three broad categories of fraud schemes are defined: fraudulent
statements, corruption, and asset misappropriation. 13
Fraudulent Statements
Fraudulent statements are associated with management fraud. Whereas all fraud involves some form of fi-
nancial misstatement, to meet the definition under this class of fraud scheme the statement itself must bring
direct or indirect financial benefit to the perpetrator. In other words, the statement is not simply a vehicle
for obscuring or covering a fraudulent act. For example, misstating the cash account balance to cover the
theft of cash is not financial statement fraud. On the other hand, understating liabilities to present a more
favorable financial picture of the organization to drive up stock prices does fall under this classification.
Table 3-8 shows that whereas fraudulent statements account for only 10 percent of the fraud cases cov-
ered in the ACFE fraud study, the median loss from this type of fraud scheme is significantly higher than
losses from corruption and asset misappropriation.

TAB L E
3-8 LOSSES FROM FRAUD BY SCHEME TYPE

Scheme Type Percent of Frauds* Loss ($)
Fraudulent statements 10 2,000,000
Corruption 27 375,000
Asset misappropriation 89 150,000

*The sum of the percentages exceeds 100 because some of the reported frauds in the ACFE study involved more than one type of fraud
scheme.

13 Report to the Nation on Occupational Fraud & Abuse. (Austin, TX: Association of Certified Fraud Examiners, 2008): 7.