AEM 323 FRAUD review - Chapter 1 4 Sources for statistics...

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Chapter 1 4 Sources for statistics on Fraud: - Government Agencies (FBI, FDIC, IRS, health agencies) – publish fraud stats from time to time, but only those related to their jurisdiction. Not complete, collected randomly, not a total picture. - Researchers – Conduct studies about particular types of fraud in certain industrial sectors. Data on actual frauds is hard to find, thus most research provides a small insight into size of the problem. Comprehensive research rare, not always based on sound scientific approaches. - Insurance Companies – provide fidelity bonding, other coverage against employee fraud. When fraud happens, they investigate (as a result, they have collected stats). These are incomplete. - Victims of Fraud – Most industries don't have an organized way for victims to report fraud, and some wouldn't even want to make fraud losses public. Association of Certified Fraud Examiners ( ACFE ) – conducted study in 1996, 2002. Estimated fraud costs US organizations more than $400 billion/yr (96). 2002 – about $600 billion ($4500/employee). - 6% of revenue lost on average FBI and other sources labeled Fraud the fastest growing crime. Size of fraud has increased – computers, etc make it much easier to steal large amounts For every $1 of fraud, Net Income is reduced by $1 - takes more revenue to recover the effect of the fraud on net income - $436 mil fraud loss (profit margin = 10%) = company needs to generate $4.36 bill in additional revenue (@20,000/car = 218,000 more cars) Economies also hurt by fraud – all companies losses put together Fraud – What it is: Intentional; trick or deceive someone out of their assets; theft; a crime What it's not : Taken by physical force (robbery); A mistake; Victimless; insignificant b/c no one gets hurt; Acceptable or justified Customers deceive sellers into giving them something they should not have Customers Organizations selling goods and services 5. Customer Overcharged for goods & services or non-shipment of goods paid for Organizations / individuals buying goods Organizations that buy goods & services 4. Vendor Individuals trick investors
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AEM 323 FRAUD review - Chapter 1 4 Sources for statistics...

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