International Fraud Awareness Week is a global effort to minimize the risks and potential impacts of fraud and provide education on fraud prevention best practices. The week acknowledges Certified Public Accountant (CPA) firms’ critical role in safeguarding financial integrity.
In today’s era, digital transactions have become the norm. This method of managing money, with the click of a mouse or tap of your finger, has revolutionized how money is spent and managed. While technology continues evolving and making things more streamlined and accessible for consumers, it can also exploit vulnerabilities to fraudsters by making more data and personal information available online if precautions are not taken.
According to the Association of Certified Fraud Examiners (ACFE), fraud costs an estimated $4.7 trillion annually globally, with an average loss of $1.7 million per fraud case. Also, organizations lose an average of 5% of revenue annually to fraud.
A CPA firm’s role extends far beyond financial audits. Collaboration with a trusted financial advisor – CPA, certified fraud examiner (CFE), or forensic accountant – can provide businesses and individuals with added security and comfort. They can conduct risk assessments to identify emerging threats and highlight potential vulnerabilities for fraud in all its forms, ranging from embezzlement and check forgery to cybercrimes and identity theft.
The battle against fraud is not a one-time, easy fix because fraud is not a static threat. Technology continually evolves and advances, as do the methods fraudsters employ.
Fraud prevention is an ongoing commitment with a multifaceted, proactive approach that protects the financial interests of businesses and individuals alike. CFEs remain vigilant and ahead of the curve about the latest tactics used by fraudsters by engaging in continuous education and professional development sessions and highlighting the latest legal and regulatory changes.
No business, nonprofit organization or professional can afford to have its bottom line or reputation damaged due to fraud. Therefore, it is paramount to be proactive and make significant efforts to limit vulnerabilities, fortify defenses and create safeguards against fraudulent activities. Obtaining a fraud risk assessment identifies potential vulnerabilities within an organization’s framework, establishes solid internal practices and strengthens its overall financial resilience.
The 2022 ACFE Report to the Nations on Occupational Fraud showed small businesses (those with less than 100 employees) had a median loss of $150,000 due to fraud. Corruption and billing schemes were cited as the most common in those organizations; that is also consistent with larger companies. The study also found that 87% of the cases involved perpetrators who had never been charged or convicted, reminding us that background checks, while an important prevention tool, cannot be relied upon solely in an internal control system. It also noted that proactive data monitoring and analysis led to a 56% reduction in the duration of the fraud, and job rotations and mandatory vacations would reduce the median loss of fraud by 54%.
Executives and boards can rely on external sources such as CFEs and CPA firms to help them develop robust internal control and fraud prevention systems.
As we observe International Fraud Awareness Week, it is essential to recognize the unwavering commitment of CFEs and CPA firms in the ever-evolving and ever-present battle against fraud. Both can provide resources to assess and monitor transactions to create peace of mind for businesses and individuals. Together, CPA firms and their clients and stakeholders can form a formidable alliance in the fight against fraud.
Sarah Jennings, CPA, CFE, CAE, currently serves as a principal and leader of Maner Costerisan’s new consulting services team. Sarah is also a certified fraud examiner.