2006 National Fraud Survey: Median Loss per Number of Employees
Number of Employees
$100,000 Median Loss
60 percent longer than organizations with any one of these mechanisms in place at the time of the fraud.
Conversely, the most common antifraud measure was the external audit, utilized by approximately three-fourths of the victims. Despite the fact that this was the most fre- quently used antifraud measure, external audits showed the least impact on median losses and time to detection, under our test. In fact, the organizations that had external audits actually had higher median losses and longer lasting fraud schemes than those or- ganizations that were not audited. Of course, there are a number of other factors that help determine the duration of the fraud and the size of the loss an organization suffers, but the fact remains that of all of the antifraud measures for which we tested, only ex- ternal audits showed an inverse relationship with median loss and scheme length. (See Exhibit 1.23.)
A common complaint among those who investigate fraud is that organizations and law enforcement do not do enough to punish fraud and other white-collar offenses. This con- tributes to high fraud levels—or so the argument goes—because potential offenders are not deterred by the weak or often nonexistent sanctions that are imposed on other fraud- sters. Leaving aside the debate as to what factors are effective in deterring fraud, we sought to measure how organizations responded to the employees who had defrauded them.
Employment Actions Taken against Perpetrator
Generally speaking, the most direct method by which victim organizations can deal with fraud perpetrators is through adverse employment decisions such as firing the