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The top three classifications or means of committing occupational fraud are corruption, asset misappropriation, and fraudulent financial statements, as depicted in Figure 1.2.

Figure 1.2 Classification of Occupational Fraud and Abuse.

Source: ACFE, Report to the Nations, 2012.

Within each classification is a myriad of types and schemes that need to be understood when considering methodology profiling. As indicated in Figure 1.3, asset misappropriation is by far the most frequent form of occupational fraud, comprising 87 percent of the cases reported; it was also the least costly form of fraud, with a median loss of $120,000.

Figure 1.3 Occupational Frauds by Category – Frequency.

Source: ACFE, Report to the Nations, 2012.

At the lower end of the frequency spectrum are cases involving financial statement fraud. Financial statement fraud was, however, by far the most costly form of occupational fraud. Financial statement fraud schemes made up just 8 percent of the cases in the ACFE study, but caused the greatest median loss, at $1 million. Corruption schemes fell in the middle, occurring in just over one-third of reported cases and causing a median loss of $250,000, with asset misappropriation having the lowest median loss, as depicted in Figure 1.4.

Figure 1.4 Occupational Fraud by Category – Median Loss.

Source: ACFE, Report to the Nations, 2012.

High-level or owner/executive perpetrators cause the greatest fraud loss to their organizations, in terms of monetary value rather than quantities of frauds. This is particularly shocking considering that the “tone at the top” is considered to be a fundamental constituent part of a sound antifraud program. In actual fact frauds committed by owners/executives were more than three times as costly as frauds committed by managers and more than nine times as costly as other employee fraud, according to the ACFE. Executive-level fraud also took much longer to detect.

The most common executive-level fraud, according to the survey, is corruption (54 percent of cases), followed by fraudulent invoicing schemes (33 percent), expense reimbursement fraud (21 percent), and fraudulent financial statements (21 percent). Other schemes include payroll fraud, check tampering, and cash theft.