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Report finds big fraud problems for small businesses

Occupational fraud continues to siphon staggering amounts of money from businesses worldwide, with smaller organizations being hit particularly hard.

That’s one of the trends identified in the 2018 Report to the Nations on Occupational Fraud and Abuse, released Tuesday, April 17, by the Association of Certified Fraud Examiners. The biennial report, which is based on thousands of fraud cases reported by fraud examiners worldwide, provides a detailed look into how fraud is being perpetrated, detected, and combatted in various industries and regions worldwide.

The median loss of the 2,690 frauds covered in the report was $130,000, but businesses with fewer than 100 employees suffered a median loss of $200,000, nearly double that of the $104,000 median loss reported for companies with 100 or more employees. In the 2016 report, examiners reported a median loss of $150,000 for small and large businesses.

Fraud is a particularly painful problem for smaller businesses because they have fewer resources with which to withstand occupational fraud, which refers to crimes committed against the organization by its own employees, directors, or officers. Limited resources also contribute to small businesses being far less likely than large organizations to use any of the 18 anti-fraud controls tracked in the Report to the Nations.

Hotlines provide perhaps the most vivid example of how the lack of a control makes small businesses more vulnerable to fraud. Tips were by far the most common initial detection method for frauds covered in the report, and small businesses were less than half as likely as their larger counterparts to have a hotline for employees to call in fraud tips anonymously. This contributed to the following data points:

  • While 44% of frauds at larger businesses were detected by a tip, only 29% of frauds at small businesses were.  
  • While a lack of controls contributed to only 25% of frauds at larger businesses, it accounted for 42% of frauds at small businesses.

Fraud differs in other ways at businesses with fewer than 100 employees:

From an April 17, 2018 Journal of Accountancy online post.  To read the complete article, please click here Or, contact a Dugan & Lopatka professional at (630) 665-4440 or This email address is being protected from spambots. You need JavaScript enabled to view it. for guidance on a specific occupational fraud issue concerning you or your business.

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