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Introduction

Exhibit 1.31

2006 National Fraud Survey: Reasons for Declining to Take Legal Action

Fear of bad publicity

43.8%

Internal discipline sufficient

33.1%

Reason Given

Private settlement

Too costly

Lack of evidence

13.1%

21.5%

30.4%

Civil suit

5.8%

Perp. disappeared

0.8%

0%

10%

20% 30%

40%

50%

Percent of Cases

Note: The sum of percentages in this chart exceeds 100% because some respondents cited more than one reason for why victim organizations declined to prosecute.

the cases that were reported in our 2006 study, the victim recovered nothing. On the other hand, over 16 percent of the victims made a full recovery, usually through their in- surance. (See Exhibit 1.32.)

Detecting and Preventing Occupational Fraud Initial Detection of Frauds

The obvious question in a study of occupational fraud is: What can be done about it? Given that our study was based on actual fraud cases that had been investigated, we thought it would be instructional to ask how these frauds were initially detected by the victim organizations. Perhaps by studying how the victim organizations had uncovered fraud, we would be able to provide guidance to other organizations on how to tailor their fraud-detection efforts. Respondents were given a list of common detection methods and were asked how the frauds they investigated were initially detected. As these results show, the frauds in our study were most commonly detected by tip (34.2%).

Unfortunately, as shown earlier, the majority of fraud victims did not have established reporting structures in place at the time they were defrauded. It is also interesting—and rather disconcerting—to note that accident was the second most common detection method, accounting for over a quarter of the frauds in our survey. This certainly seems

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