Asset Misappropriation
Asset misappropriation is the most common of occupational fraud. The 3 main categories are:
- Cash receipts schemes.
- Fraudulent disbursements.
- Theft of inventory and non-assets.
These types of fraud may be on or off of the victim organization’s book. These types of fraud are significant, as they represent 89.8% of all occupational fraud occurrences in the United States, according to the 2010 Report to the Nations on Occupational fraud and abuse.
This type of fraud affects many different types of companies and departments. Examples include retail companies and their cash register systems, and companies and their payroll systems. Most schemes where inventory and other non-cash items are stolen fall into 4 categories:
- Larceny Schemes.
- Asset requisition and transfer schemes.
- Purchasing and receiving schemes.
- False shipment schemes.
There are 4 basic remedies to prevent inventory fraud:
- Proper documentation.
- Segregation of duties.
- Independent checks.
- Physical safeguards.
The types of companies that were victimized the most are private companies with less than 100 employees. The 2010 Report to the Nations on Occupational Fraud and Abuse also set the median loss amount at $250,000. One of the most significant reasons for this is the lack of internal controls.
Kenneth B. Hunt MBA, CFE
Kenneth Hunt's Blog 