Hotlines Helpful for Blowing the Whistle on Fraud
Date : 14 Jul 2008 Category : Technology
NewsFactor NetworkMost studies consistently show that about a third of the instances of business and workplace fraud that eventually come to light were first disclosed by employees or other key informants blowing the whistle. Most recently, this was confirmed in 2006 by the Association of Certified Fraud Examiners (ACFE) in its biennial, in-depth survey. The fraud-busting group found that 34.2 percent of "occupational fraud" -- defined essentially as misusing one's position at an organization for personal economic gain -- was first detected by tipsters.
Tips, according to ACFE's survey, work better at detecting white-collar larceny than a whole panoply of formalized legalistic procedures. Disclosure of fraud from informants outpaces internal audits (20.2 percent), internal controls (19.2 percent) and external audits (12 percent).
None of those more orthodox constraints, moreover, qualified for the second-most-common way that rip-offs are uncovered. A quarter of occupational fraud (25.4 percent) was detected "by accident," according to ACFE.
Together, tips and accidental discovery account for nearly 60 percent of all fraud detection, which speaks to the capricious and serendipitous nature of combating thievery that is often elaborate and technologically sophisticated. Unlike an old-fashioned bank embezzler, who stuffs cash into a valise and blows town, modern defalcation schemes typically involve adding or removing accounting entries into a computer or remitting payments to spurious addresses.
In cases where top company executives or owners concocted a scam, ACFE reports, the percentage of frauds first uncovered by tips alone...