2002 Report to the Nation

Despite the Enron debacle and other high-profile accounting failures, the overall rate of fraud may not have increased significantly in the last six years, according to the Association's Report to the Nation on Occupational Fraud and Abuse - The Wells Report. 

Executive Summary 

• The 2002 Report to the Nation on Occupational Fraud and Abuse - The Wells Report - covers 663 occupational fraud cases that caused more than $7 billion in losses.  
• Certified Fraud Examiners estimate that six percent of revenues will be lost in 2002 as a result of occupational fraud and abuse. Applied to the U.S. Gross Domestic Product, this translates to losses of approximately $600 billion or about $4,500 per employee. 
• More than half of the frauds in this study caused losses of at least $100,000 and nearly one in six caused losses in excess of $1 million. 
• All occupational frauds fall into one of three categories: asset misappropriations, corruption, or fraudulent statements.  
• More than 80 percent of occupational frauds involve asset misappropriations. Cash is the targeted asset 90 percent of the time.  
• Corruption schemes account for 13 percent of all occupational frauds and they cause more than $500,000 in losses, on average. 
• Fraudulent statements are the most costly form of occupational fraud with median losses of $4.25 million per scheme.  
• The average scheme in this study lasted 18 months before it was detected.  
• The most common method for detecting occupational fraud is by a tip from an employee, customer, vendor or anonymous source. The second most common method is by accident.  
• Organizations with fraud hot lines cut their fraud losses by approximately 50 percent per scheme. Internal audits, external audits, and background checks also significantly reduce fraud losses. 
• The typical perpetrator is a first-time offender. Only seven percent of occupational fraudsters in this study were known to have prior convictions for fraud-related offenses. 
• Small businesses are the most vulnerable to occupational fraud and abuse. The average scheme in a small business causes $127,500 in losses. The average scheme in the largest companies costs $97,000.  

The Certified Fraud Examiner participants in a recent Association survey, which spawned the 2002 Report to the Nation on Occupational Fraud and Abuse - The Wells Report - projected that about six percent of revenues, or $600 billion, will be lost in 2002 as a result of occupational fraud and abuse.