In this lesson, we're going to look at the most recent research published by the experts. Many people I have talked to myself included have experienced fraud in their own organization at some level. This anecdotal evidence is interesting but not statistically valid. And for this lesson, we turn to the Association of Certified fraud examiner's, this professional body has been publishing updated prostate tests every two years for the past 18 years. Remarkably, despite all this wonderful information, I'm shocked and somewhat disappointed that the results between updates don't change significantly. In other words, no one seems to be doing anything with this information to improve the organization.

I will hit the highlights of this report in this lesson and then lessons to follow, but I strongly encourage you to view the report for yourself and download a copy from the link provided on your screen. We looked at the power triangle in an earlier lesson. While it's not specifically referred to In the research and the statistics, Washburn's application, it should become self evident if you've been paying attention so far. In an earlier lesson, we also talked about different types of fraud schemes. The experts call this the fraud tree. The fact that we haven't covered each and every one of these schemes is somewhat irrelevant, because the root cause of each scheme is the same, as are the methods of prevention and detection.

So needless to say, your organization can suffer an attack from dozens of different schemes, but you can protect yourself with one integrated anti fraud strategy. So broadly speaking, when you roll up all the schemes, you see that the asset misappropriation schemes are by far the most common accounting for nearly 85% of the cases with relatively lower losses, those still significant these two statistics alone tell you how prevalent asset misappropriation schemes are in the workplace. I'm willing to suggest that every organization suffers some degree of leakage of assets from one of these schemes. Corruption, which includes bribes and illegal gratuities and extortion still make up a significant percentage of the fraud cases, it has a slightly higher median loss. Because this type of fraud happens outside of the organization, it's very hard to prevent and detect. And finally, financial reporting fraud is the most costly and also the least common of the fraud schemes noted.

It typically happens at the highest levels of the organization. let's slice and dice the statistics. A few more ways to gain perspective in the remainder of this lesson and the lessons to come. This chart shows a summary of the losses reported by the cases under investigation. Half of the cases report losses less than $200,000 while a staggering 22 percent of cases are claiming losses of greater than $1 million. Note that the research tracks the trend in the fraud statistics comparing 2014 to 2012 and 2010.

We'll see this throughout our course discussion, and you'll see for yourself the consistency between the updates in each research study. Check out this hot map some of the more common asset misappropriation schemes. Obviously, the schemes in the upper right pose a greater risk than those in the lower left. Keep in mind that these are frauds that have been discovered. When you consider all frauds detected and undetected. I wonder what this heat map would look like?

The duration has a significant impact on the amount of the loss, which makes sense. And then of course, we need to consider where all the schemes to commit fraud actually hatch. perhaps not surprisingly, accounting tops the list has the accountants who are best positioned to conceal the malicious act. However, I think it's equally as interesting that the fraud cases investigated cover every department of the organization, from operations to sales to purchasing, and even a handful of cases involving internal audit all the humanity. If you can't trust internal audit, who can you trust? Hmm, let's see, maybe executive management?

Ah, hell no. They're number four on the list. And number one, in terms of the size of their loss, how about the board directors? I know they're there to weigh down the list, mind you, but when they do a fraud, they are looking at the petty cash. So my point is, you need to think about fraud in an organizational context and not just limited scope here on the finance team. This is getting interesting.

Let's take it one level lower What type of schemes might a fraud investigator uncover in the accounting department, executive management, salesperson and so on. From this heat map, you get a sense of the types of fraud committed in each of the organizations department. corruption and billing fraud are universal biggies. In terms of areas of greatest fraud risk, you can pause the video and make your own findings. So the key takeaways from this lesson are, first of all fraud happens across your organization. Secondly, recognize that the schemes are many and varied.

And finally, your typical file case will cost your organization $145,000. And that's not a lot of once has it it generally occurs over a long period of time. So that's all for this lesson. So until next time, don't stop to get to the top when you get to the top. Don't stop