In 2016, The Association of Certified Fraud Examiners celebrates its anniversary. Its birth was heralded by the first report to the nations on occupational fraud and abuse. This groundbreaking document changed the views on corporate and occupational fraud forever. The featured article, written by Dick Carroza and published in May/June 2016, provides the readers with a brief history of the document and a clear perspective on why it is so important to the industry.
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The article begins with a case scenario for the readers. It is the year 1995, and Sam works as a CFE in a mid-sized company. Back then, little information about fraud was available. No authoritative sources to draw upon, no programs or deterrents, no methodology of research, no nothing. The bosses were blissfully unaware of the damage fraud was causing them. This changed with Dr. Joseph T. Wells, the founder of ACFE and the author of this groundbreaking research.
His efforts began in the early 1990s. In order to gather data for his research, Wells dispatched numerous surveys to the companies located in the US, along with a request to estimate the amount of revenue lost due to fraud. Wells also recruited several other researchers to help him analyze the first wave of data. More than 2,600 CFEs answered the call. The first Report on Occupational Fraud and Abuse was published in 1996.
Wells’ research ended up becoming the common body of knowledge for the industry, upon which further research and analysis could be built. This was a much-needed document, as many Certified Fraud Examiners knew about the dangers of fraud, but had no official research to back up their claims. John Warren and James D. Ratley, both members of the ACFE, remark that the survey was a major push forward.
The first research introduced the concept of the Fraud Tree. Wells identified its three main branches – corruption, asset misappropriation, and financial statement fraud. Before this, there was a persistent myth that fraud was conducted in ways too numerous to count. The research, along with similar ones conducted in the following years, confirmed that the number of effective fraud schemes is limited.
This year features the Ninth report being published. Many specialists around the world note the positive influence these reports had on the overall world dynamic. Comparisons were made between the surveys. Although the number of documented frauds fluctuated from one report to another, no new examples of fraud were identified.
The ACFE reports became the primary go-to documents for all CFEs around the world. Many of them use the reports in order to raise fraud awareness among their clients and senior executives. Fraud can be extremely damaging to business, but its destructive potential is not yet fully realized.
Nowadays, the ACFE works in tandem with the Institute of Fraud Prevention, which took on the responsibility of receiving and analyzing all the survey data for future ACFE reports and other academic works. The reports see much practical and educational use. The internet provides a valuable tool for spreading awareness.
The article concludes with acknowledging the positive role of many CFEs, which manifested in providing data for the initial research. It helped move the problem from the backroom to the boardroom. Dr. Wells remarks that his studies are useful to everyone, not just the CFEs.