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Do you know where your internal controls are? (Proceedings)

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Aug 01, 2009

Estimates of fraud in the united states

Consider the following estimates of fraud in the United States

i. Health agencies estimate fraud represents 10 percent of the nation's health care bill at a cost of $75 to $130 billion a year.

ii. The tax gap, which is the difference between what people owe the government and what they pay, exceeds $200 billion a year.

iii. The IRS estimates that electronic tax filing fraud costs the government billions of dollars a year. For example, in one 10-month period, fraudulent electronic returns increased 105 percent.

iv. Thirteen percent of credit card sales resulted in loss due to fraud. For example, fraud losses at MasterCard exceed $300 million a year.

v. Losses related to telephone fraud exceed $10 billion a year.

vi. Some 60 percent of Americans have shoplifted. An estimated 200 million shoplifting incidents a year cost U.S. businesses almost $12 billion or about $150 per family per year.

The pervasiveness of dishonesty

Not only are the losses to fraud very high, but the estimates of the number of people who commit or would commit a dishonest act are also very high. Consider the following:

i. The director of fraud and security for a large consulting company stated that of every 10 workers, three look for a way to steal, three would steal if given an opportunity, and four would usually be honest.

ii. Two out of three college students admit to cheating on exams.

iii. An Institute of Management study found that 87 percent of managers were willing to commit fraud if it would make their organizations look better.

iv. A study of 400 people found that 47 percent of top executives, 41 percent of controllers, and 76 percent of graduate-level business students were willing to commit fraud by understating write-offs that cut into their company's profits.