Skip to 0 minutes and 1 secondSo what is fraud? Fraud is an intentional and reckless act, which is believed and acted upon by the victim to the victim's damage. There might be a lot of errors in an accounting system -- errors in the data. They could just be mistakes. The difference between those errors being a mistake and fraud is the intent behind them. So what we're going to look at in this section is the Association of Certified Fraud Examiners' Report to the Nations. The Association of Certified Fraud Examiners, which I will call ACFE, is a leader in fraud examination. And every other year, they put out a report of a lot of wonderful and useful and very informative fraud statistics.

Skip to 0 minutes and 42 secondsSo there's three types of fraud: asset misappropriation, corruption, and financial statement fraud. Asset misappropriation is theft; the theft of cash, the theft of non-cash assets, such as inventory.

Skip to 0 minutes and 57 secondsCorruption: unethical conduct by a person in a position of authority, often to acquire a personal benefit, like bribery. And then financial statement fraud; that's when your company is putting out financial information that is intentionally manipulated to make the company look like they're doing better than they really are. So how often is each category occurring? As you can see here, asset misappropriation -- that theft of cash and non-cash items -- is occurring by far the most often. That's someone stealing from the register or stealing a piece of inventory from the company. That happens much more often than the other two categories. Conflict of interest -- corruption -- that can be around the middle, in the 40, 50% range.

Skip to 1 minute and 35 secondsAnd you can see here, financial statement fraud actually doesn't occur all that often. But when financial statement fraud does occur, it is by far more costly than the other two categories. As you can see here, it far outweighs the cost of asset misappropriation, with a median loss of about $975,000 per fraud. So how long do these frauds go on? On average, about 18 months, which is what you can see here. What you can also see is the longer they go, the more costly they are, which is why it's so important that companies really be proactive in fighting fraud.

What is occupational fraud?

‘Occupational fraud’ refers to a fraud committed by an employee, against his or her employer.

In this video, we explore three different types of occupational fraud: asset misappropriation, corruption and financial statement fraud. We also discuss which type of fraud has the greatest impact on the victim, the employer.

Share this video:

This video is from the free online course:

Business Analytics: The Data Explosion

Kogod School of Business at American University

Get a taste of this course

Find out what this course is like by previewing some of the course steps before you join: