New Data: The Financial Cost of Occupational Fraud

Occupational fraud is the use of one’s position to exploit, through misuse or misappropriation, an organization’s resources and assets for personal gain. Most people recognize and understand occupational fraud through more common terms such as embezzlement or corruption. Every two years, the Association of Certified Fraud Examiners (“ACFE”) conducts a survey to provide insight into the potential cost and financial impact of occupational fraud on businesses. The results of this survey are published in the ACFE’s Report to the Nations. 

The survey indicates the numerous schemes that potential perpetrators have at their disposal if they choose to target an organization. However, these schemes can all be generally categorized into one of three categories: corruption, asset misappropriation, and financial statement fraud. According to the ACFE’s Occupational Fraud 2024: A Report to the Nations, of these three categories, asset misappropriation occurs at a higher rate (89% of fraud cases) as compared to those for corruption (48%) and financial statement fraud (5%), respectively. The 2022 report was the first to discuss fraud involving cryptocurrency and indicated it was involved in 8% of fraud cases. The current report indicates only 4% of fraud cases involved cryptocurrency, with 47% of such cases involving conversion of misappropriated assets to cryptocurrency. 

Asset Misappropriation vs. Financial Statement Fraud Based on Survey Results 

Asset Misappropriation Fraud 

Asset misappropriation occurs when those entrusted to hold and manage the assets of a business physically steal the asset or abuse the benefits of the asset for their own personal gain. Considering asset misappropriation is the overwhelming favorite route for the typical occupational fraudster, it is important to better understand some of the more common schemes that fraudsters may try to employ on your business and the related impacts. As seen in the chart below, the largest and most common occupational fraud schemes include excessive billing, theft of non-cash items, and exaggerated or non-business-related expense reimbursements. 

Based on the ACFE survey, we’ve noticed that although asset misappropriation occurs at a much higher rate than corruption or financial statement fraud, that does not necessarily mean that it will have the largest monetary effect on the business. The survey indicates that the median loss due to asset misappropriation is $120,000.