LIVINGSTON, NJ – The 2014 Association of Certified Fraud Examiners, an 80-page “Report to the Nations” has just been released and Livingston-based accounting firm, Sobel & Co., LLC has provided the readers of The Alternative Press with important highlights that small and large businesses alike should be aware of about fraud.
First of all, “fraud doesn’t go away,” said Darryl Neier, MS, CFE, principal in charge of forensic accounting at Sobel & Co. In fact, “most frauds are undetected for 18 months to two years. What we are trying to do is make sure businesses understand what the impact on their business is.”
According to Neier’s report highlights, on average, an organization loses around five percent of revenues per year. If applied to the 2013 estimated Gross World Product, this translates to a potential projected global fraud loss of nearly $3.7 trillion, and according to the study, the median loss caused by frauds was $145,000 with 24 percent of the cases involved losing at least $1 million.
For this reason, Neier urges companies to look at any potential red flags, as fraud can happen in any industry with any size business. According to Neier, even smaller organizations that use one person to handle all cash flow, from check writing to reconciliation, are actually at a higher risk of being victims of fraud.
He said, “Smaller organizations tend to suffer disproportionately large losses due to lack of controls set in place.”
Other findings from the report say that the banking and financial services, government and public administration, and manufacturing industries continue to have the greatest number of cases. Finally, approximately 77 percent of the frauds counted in the study were committed by individuals working in one of seven departments: accounting, operations, sales, executive/upper management, customer service, purchasing and finance.
“Every type of business is susceptible to fraud,” said Neier. “Businesses need to look at their internal controls.”
As the head of forensic accounting at Sobel, Neier explained how his firm would be able to help any company identify fraud and/or implement new policies that would prevent it from happening.
“Part of what we do is called a fraud vulnerability study,” said Neier. “We take a look at several components and break it down into three phases.”
The first phase includes a “comprehensive review of administration and financial reporting structures. This includes interviews with various personnel and a review of policies and procedures.”
“We look at the whole business environment and how funds flow in and out of the company, said Neier. “Based on this analysis, we go to the second phase, which includes using sophisticated computer analytics to help us rank risks that we identify,” said Neier.
Lastly, we “meet with the management of the business to discuss our findings and implement new policies and procedures.”
A full copy of the “Report to the Nations” is available on the Sobel & Co. website. For further information on how Sobel’s forensic accounting group can help a business mitigate fraud, contact Darryl Neier at (973) 994-9494.