This study covers 508 cases of occupational fraud totaling over $761 million in losses. All information was provided by the Certified Fraud Examiners(CFEs) who investigated these cases.
Occupational frauds in our study were much more likely to be detected by a tip than through other means such as internal audits, external audits, and internal controls. Among frauds committed by owners and executives, which tend to be the most costly,over half of all cases were identified by a tip. Confidential reporting mechanisms reduce fraud losses significantly. The median loss among organizations that had anonymous reporting mechanisms was $56,500. In organizations that did not have established reporting procedures, the median loss was more than twice as high. While Sarbanes-Oxley only requires publicly traded companies to establish confidential reporting mechanisms for employees, our data strongly suggests that these programs should also embrace third-party sources such as customers and vendors. Among cases that were detected by a tip, 60% of the tips came from employees, 20% of the tips came from customers, 16% came from vendors, and 13% came from anonymous sources.