Occupational fraud is defined by the Association of Certified Fraud Examiners (ACFE) as “the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.” This means that the perpetrator of the fraud steals assets from the employer, in contrast to financial fraud in which the firm’s financial statements are misrepresented. For example, the Enron fraud in 2001 is a case of financial fraud, while the theft of the company’s inventory by an employee would be occupational fraud. The ACFE’s 2016 Report to the Nation on occupational fraud is shown at https://s3-us-west-2.amazonaws.com/acfepublic/2016-report-to-the-nations.pdf. The study shows some distinct patterns to these fraud cases.

Required

Go to the ACFE link shown above and review the study to determine the following:

1. What are the three most common behavioral indicators (red flags) of fraud?

2. Are small companies or larger companies more vulnerable to fraud, and why?

3. What was the dollar amount of the median annual loss to the companies in the ACFE’s study of occupational fraud?

4. List the three top means by which occupational fraud is usually detected.

5. How important in detecting fraud is the use of “hotlines,” which employees can use to report fraud?