Friday, January 13, 2006

Accounting Firm Estimates Fraud Losses at 66 Billion Yearly

Goldstein Lewin and Company (a Florida accounting firm) released an interesting study putting fraud losses in the U.S. at $66 billion yearly. In their study, they state that reported fraud has risen 22 percent and 6 percent of annual revenues are lost to fraud.

The study also states that most of the people caught committing fraud have no previous record of doing so and that companies rarely recover their losses.

The Sarbanes-Oxley act (Section 404) requires public companies to implement controls to prevent, identify and detect fraud. As a result of this, most publicly held companies have been tightening their controls and the news seems to awash with stories of corporate scandals.

Here is the full presentation from Goldstein and Lewin:

$66 billion (if accurate) is a tremendous amount of money. Recent stories in the media of senior executives being caught committing fraud would seem to validate this. Although, these are the stories that make headlines, in reality fraud can and does occur at all levels of the food chain.

In today's business environment, a prudent company needs to consider fraud prevention, detection and apprehension (if necessary) as a element of their continued growth and profitability.

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